ABSTRACT
This chapter examines whether contract durations and indexation in United States manufacturing in the postwar period have been reasonably consistent with the implications of the Jo Anna Gray literature. It argues that neither the time-series nor the cross-sectional patterns in US manufacturing support the standard view of contracting. The contract data were put together under the direction of Wayne Vroman at the Urban Institute. Much of the empirical literature has focused on the time-series behavior of contracting, in particular how contract length and indexation have responded to price-level uncertainty. The chapter examines whether bargainers are more likely to index contracts of a given length when they expect price-level surprises to move in conjunction with employment surprises. The literature on optimal length of labor contracts can be traced to the monopoly pricing problem examined by Robert J. Barro.
