Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/32596 
Year of Publication: 
2009
Series/Report no.: 
Jena Economic Research Papers No. 2009,094
Publisher: 
Friedrich Schiller University Jena and Max Planck Institute of Economics, Jena
Abstract: 
If the future market wage is uncertain, engaging in long-term employment is risky, with the risk depending on how regulated the labor market is. In our experiment long-term employment can result either from offering long-term contracts or from repeatedly and mutually opting for rematching. Treatments differ in how regulations restrict the employer's flexibility in adapting the employment contract to changes of the market (wage). All treatments allow for longer contract duration as well as for mutually opting to be rematched. Effort is chosen by employees after a contract is concluded. Treatments vary from no flexibility to no restriction at all. Will more (downward) flexibility be used in ongoing employment but reduce efficiency? If so, deregulation may weaken rather than promote labor market efficiency. And will regulation crowd out long-term employment, either in the form of long-term contracts or voluntary rematching?
Subjects: 
deregulation
employment contracts
wage flexibility
principal-agent theory
experimental economics
repeated interaction
JEL: 
C72
C90
F16
J21
J24
L10
Document Type: 
Working Paper

Files in This Item:
File
Size
734.16 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.