Long-term and short-term labor contracts versus long-term and short-term debt financial contracts

Abstract

This paper has three objectives: First to analyze the interaction between the basic internal contracts that shape the firm (labor and financial contracts). In particular we show how their temporal dimensions are related. The linkage between firm-s internal contracts and the project choice (short-term or long-term) is the second objective of our study. Finally, we check how sensitive are the type of financial intermediary (banks or markets) to the relations previously studied. These results allow us to rationalize several facts that characterize the US-UK financial system and the German-Japanese ones. As a direct implication of our theoretical model, sorne empirical tests are proposed which are particularly relevant to describe sorne features of the current Spanish economy.