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Trust between parties should drive contract design: if parties were suspicious about each others’ reaction to unplanned events, they might agree to pay higher costs of negotiation ex ante to complete contracts. Using a unique sample of U.S. consulting contracts and a negative shock to trust between shareholders/managers (principals) and consultants (agents) staggered across space and over time, we find that lower trust increases contract completeness. Not only the complexity but also the verifiable states of the world covered by contracts increase after trust drops. The results hold for several novel text-analysis-based measures of contract completeness and do not arise in falsification tests. At the clause level, we find that non-compete agreements, confidentiality, indemnification, and termination rules are the most likely clauses added to contracts after a negative shock to trust and these additions are not driven by new boilerplate contract templates. These clauses are those whose presence should be sensitive to the mutual trust between principals and agents.
Using two datasets containing demographically representative samples of the Dutch population, I study how lifetime experiences of aggregate labor market conditions affect personality. Three sets of findings are reported. First, experienced aggregate unemployment is negatively correlated with the levels of all Big Five personality traits, except for conscientiousness (no significant correlation). Second, in panel data models with individual fixed effects I find that changes in experienced aggregate unemployment cause changes in emotional stability and agreeableness for men, and conscientiousness for women. The correlation is positive, and effects are economically large. Thirdly, I report suggestive evidence that the main driver is experienced aggregate unemployment, instead of other macroeconomic variables as experienced GDP, stock market returns or inflation. Taken together, these findings suggest that changes in Big Five personality traits are systematically related to experienced aggregate labor market conditions.