Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/32596
Authors: 
Berninghaus, Siegfried K.
Bleich, Sabrina
Güth, Werner
Year of Publication: 
2009
Series/Report no.: 
Jena economic research papers 2009,094
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

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