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Labor Contract Law -An Economic View

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  • Yaofeng Fu
  • Ruokun Huang
  • Yiran Sheng

Abstract

China's new labor law -- Labor Contract Law has been put into practice for over one year. Since its inception, debates have been whirling around the nation, if not the world. In this article, we take an economic perspective to analyze the possible impact of the core item -- open-ended employment contract, and we find that it deals poorly with adverse selection, with moral hazard problems arise, which fails to meet the expectations of law-makers and other parties.

Suggested Citation

  • Yaofeng Fu & Ruokun Huang & Yiran Sheng, 2017. "Labor Contract Law -An Economic View," Papers 1702.03977, arXiv.org.
    • Handle: RePEc:arx:papers:1702.03977
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    1. Bengt Holmstrom, 1979. "Moral Hazard and Observability," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 74-91, Spring.
    2. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
    3. HOLMSTROM, Bengt, 1979. "Moral hazard and observability," LIDAM Reprints CORE 379, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Bruce C. Greenwald, 1986. "Adverse Selection in the Labour Market," Review of Economic Studies, Oxford University Press, vol. 53(3), pages 325-347.
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