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Procrastinators and hyperbolic discounters: Probability of transition from temporary to full-time employment

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  • Fumio Ohtake
  • SunYoun Lee

Abstract

Temporary agency work (TAW) is believed to facilitate the matching between firms and on-the-job searchers. This leads to shortening of the unemployment and job search duration. On the other hand, firms that hire temporary workers have less incentive to train them, which makes it difficult for low-skilled temporary workers to find a better job in future. Current literature has not established whether TAW employment improves the welfare of either or both the employers and employees. Therefore, this paper examines the effect of TAW employment in the Japanese labor market on employment transitions focusing on individual time preferences. Investments in onefs career involve a trade-off between immediate costs and later rewards, and thus, individual heterogeneity in time preferences may explain the behavioral patterns of labor force. We find that TAW employees have a tendency toward impatience and hyperbolic discounting. In addition, those who have held temporary job are less likely to move into full-time job positions, but no significant wage differences are observed. The strength of the negative effects on the transition probabilities declines over time but the significant effects remain over the following years. Our results indicate that TAW for employees in Japan is more likely to function as a gdead-endh rather than gstepping stoneh toward stable full-time employment. Key Creation-Date: 2012-05

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Paper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0841.

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Handle: RePEc:dpr:wpaper:0841

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  1. Alison L. Booth & Marco Francesconi & Jeff Frank, 2002. "Temporary Jobs: Stepping Stones or Dead Ends?," LABORatorio R. Revelli Working Papers Series 8, LABORatorio R. Revelli, Centre for Employment Studies.
  2. OKUDAIRA Hiroko & OHTAKE Fumio & KUME Koichi & TSURU Kotaro, 2011. "What Does a Temporary Help Service Job Offer? Empirical suggestions from a Japanese survey," Discussion papers 11077, Research Institute of Economy, Trade and Industry (RIETI).
  3. M. Daniele Paserman, 2004. "Job Search and Hyperbolic Discounting: Structural Estimation and Policy Evaluation," 2004 Meeting Papers 99, Society for Economic Dynamics.
  4. Güell, Maia & Petrongolo, Barbara, 2003. "How Binding are Legal Limits? Transitions from Temporary to Permanent Work in Spain," CEPR Discussion Papers 3931, C.E.P.R. Discussion Papers.
  5. A. Smith, Jeffrey & E. Todd, Petra, 2005. "Does matching overcome LaLonde's critique of nonexperimental estimators?," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 305-353.
  6. Miguel A. Malo & Fernando Muñoz-Bullón, . "Temporary help agencies and the labour market biography: A sequences-oriented approach," Studies on the Spanish Economy 132, FEDEA.
  7. Sascha O. Becker & Marco Caliendo, 2007. "mhbounds - Sensitivity Analysis for Average Treatment Effects," Discussion Papers of DIW Berlin 659, DIW Berlin, German Institute for Economic Research.
  8. Drago, Francesco, 2006. "Career Consequences of Hyperbolic Time Preferences," IZA Discussion Papers 2113, Institute for the Study of Labor (IZA).
  9. Kimball, Miles S & Sahm, Claudia R & Shapiro, Matthew D, 2008. "Imputing Risk Tolerance From Survey Responses," Journal of the American Statistical Association, American Statistical Association, vol. 103(483), pages 1028-1038.
  10. Stefano DellaVigna & M. Daniele Paserman, 2004. "Job Search and Impatience," NBER Working Papers 10837, National Bureau of Economic Research, Inc.
  11. Andrea Ichino & Fabrizia Mealli & Tommaso Nannicini, 2005. "Temporary Work Agencies in Italy: A Springboard Toward Permanent Employment?," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 64(1), pages 1-27, September.
  12. Thaler, Richard, 1981. "Some empirical evidence on dynamic inconsistency," Economics Letters, Elsevier, vol. 8(3), pages 201-207.
  13. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
  14. Rebick, Marcus, 2005. "The Japanese Employment System: Adapting to a New Economic Environment," OUP Catalogue, Oxford University Press, number 9780199247240.
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