Contract duration and indexation in a period of real and nominal uncertainty

A large sample of Canadian union contracts is used to study the determinants of key provisions such as their duration and elasticity of indexation. Over the last two decades the former has doubled and the latter has halved in size. Techniques, which account for the interaction between duration and indexation and a latent elasticity of indexation are used. The period studied (1976–2000) includes high and low inflation and substantial fluctuations in real and nominal uncertainty, allowing these variables to influence contracts. Results suggest that these variables account for the secular and cyclical changes in contract provisions.