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Going on the Long Race? - Employment Duration and (De)Regulation of Experimental Stochastic Labor Markets

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Author Info

  • Siegfried Berninghaus

    ()
    (Institut für Wirtschaftstheorie und Operations Research, University of Karlsruhe)

  • Sabrina Bleich

    ()
    (Institut für Wirtschaftstheorie und Operations Research, University of Karlsruhe)

  • Werner Güth

    (Max Planck Institute of Economics, Jena)

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    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?

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    Bibliographic Info

    Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2009-094.

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    Date of creation: 12 Nov 2009
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    Handle: RePEc:jrp:jrpwrp:2009-094

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    Related research

    Keywords: deregulation; employment contracts; wage flexibility; principal-agent theory; experimental economics; repeated interaction;

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