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Changes in the Employment Contract? Evidence from a Quasi-Experiment

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Author Info

  • Chaness, G.
  • Levine, D.I.

Abstract

Many authors have discussed an apparent shift to a new employment contract characterized by less commitment between employer and employee coupled with closer ties between wages within the enterprise and those in the external labor market. We study the issue of when people in the U.S. and Canada feel pay cuts are fair, comparing our results with those of Kahneman, Knetsch, and Thaler (1986). In contrast to much previous discussion, we find no evidence of increasing acceptance of pay cuts--a measure of whether external, not internal, labor markets are considered fair. These results suggest that new organizational forms might do well to preserve some of the features of the "old" employment contract.

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Bibliographic Info

Paper provided by California Berkeley - Institute of Industrial Relations in its series Papers with number 70.

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Length: 25 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:fth:calbir:70

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Postal: U.S.A.; University of california Berkeley, The Institute of Industrial Relations. 2521 Channing Way. Berkeley California 94520-5555

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Keywords: EMPLOYMENT ; CONTRACTS;

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References

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  1. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-41, September.
  2. Rebecca M. Blank, 1997. "What Causes Public Assistance Caseloads to Grow?," NBER Working Papers 6343, National Bureau of Economic Research, Inc.
  3. Alvin E. Roth & V. Prasnikar & M. Okuno-Fujiwara & S. Zamir, 1998. "Bargaining and market behavior in Jerusalem, Liubljana, Pittsburgh and Tokyo: an experimental study," Levine's Working Paper Archive 344, David K. Levine.
  4. Erica Groshen & David Levine, 1998. "The rise and decline(?) of U.S. internal labor markets," Research Paper 9819, Federal Reserve Bank of New York.
  5. Gary Charness & David I. Levine, 1999. "When are layoffs acceptable? Evidence from a quasi-experiment," Economics Working Papers 369, Department of Economics and Business, Universitat Pompeu Fabra.
  6. David Card, 1989. "The Impact of the Mariel Boatlift on the Miami Labor Market," NBER Working Papers 3069, National Bureau of Economic Research, Inc.
  7. David Card & Richard B. Freeman, 1993. "Introduction to "Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States"," NBER Chapters, in: Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States, pages 1-20 National Bureau of Economic Research, Inc.
  8. Matthew Rabin., 1992. "Incorporating Fairness into Game Theory and Economics," Economics Working Papers 92-199, University of California at Berkeley.
  9. Tversky, Amos & Kahneman, Daniel, 1986. "Rational Choice and the Framing of Decisions," The Journal of Business, University of Chicago Press, vol. 59(4), pages S251-78, October.
  10. David Card & Richard B. Freeman, 1993. "Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States," NBER Books, National Bureau of Economic Research, Inc, number card93-1.
  11. Piron, Robert & Fernandez, Luis, 1995. "Are fairness constraints on profit-seeking important?," Journal of Economic Psychology, Elsevier, vol. 16(1), pages 73-96, March.
  12. MacKenzie, Scott B. & Podsakoff, Philip M. & Fetter, Richard, 1991. "Organizational citizenship behavior and objective productivity as determinants of managerial evaluations of salespersons' performance," Organizational Behavior and Human Decision Processes, Elsevier, vol. 50(1), pages 123-150, October.
  13. Lipset, S.M., 1990. "Labor and Socialism in Canada and United States," Papers 7, Woodsworth College-.
  14. Gorman, Raymond F & Kehr, James B, 1992. "Fairness as a Constraint on Profit Seeking: Comment," American Economic Review, American Economic Association, vol. 82(1), pages 355-58, March.
  15. Frey, Bruno S. & Pommerehne, Werner W., 1993. "On the fairness of pricing -- An empirical survey among the general population," Journal of Economic Behavior & Organization, Elsevier, vol. 20(3), pages 295-307, April.
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Citations

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Cited by:
  1. Michael Christensen & Thorbjørn Knudsen, 2006. "Evaluation of Uncertain International Markets The Advantage of Flexible Organization Structures," DRUID Working Papers 06-04, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  2. Danielson, Anders & Holm, Hakan, 2004. "Do You Trust Your Brethren? Eliciting Trust Attitudes and Trust Behavior in a Tanzanian Congregation," Working Papers 2004:2, Lund University, Department of Economics.
  3. repec:iab:iabzaf:v:37:i:2:p:127-145 is not listed on IDEAS
  4. Charness, Gary B & Levine, David I. I., 2000. "When Are Layoffs Acceptable? Evidence From A Quasi-Experiment," University of California at Santa Barbara, Economics Working Paper Series qt4vs7h4hh, Department of Economics, UC Santa Barbara.
  5. Arnaldo Camuffo, 2002. "The Changing Nature of Internal Labor Markets," Journal of Management and Governance, Springer, vol. 6(4), pages 281-294, December.
  6. Gary Charness, 2004. "Attribution and Reciprocity in an Experimental Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 665-688, July.
  7. Gerlach, Knut & Levine, David & Stephan, Gesine & Struck, Olaf, 2006. "The acceptability of layoffs and pay cuts : comparing North America with Germany," IAB Discussion Paper 200601, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  8. Christian Pfeifer, 2007. "The Perceived Fairness of Layoffs in Germany: Participation, Compensation, or Avoidance?," Journal of Business Ethics, Springer, vol. 74(1), pages 25-36, August.

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