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The Acceptability of Layoffs and Pay Cuts: Comparing North America with Germany

  • Gerlach, Knut
  • Levine, David I.
  • Stephan, Gesine
  • Struck, Olaf

Substantial evidence shows that North Americans are generally more accepting of the market than Europeans and attribute market outcomes to a larger degree to effort or skill. Thus, we expect North Americans to be more accepting of layoffs and pay cuts than Germans and that Germans will be more sensitive to the procedures and conditions under which pay cuts and lay-offs occur. The empirical results from our quasi-experimental study are largely in line with our hypotheses. These results may help explain and be explained by the different labour market in-stitutions in the different regions.

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Paper provided by Institute of Industrial Relations, UC Berkeley in its series Institute for Research on Labor and Employment, Working Paper Series with number qt1k21d0rg.

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Date of creation: 01 Mar 2005
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Handle: RePEc:cdl:indrel:qt1k21d0rg
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  1. David I. Levine & Dale Belman & Gary Charness & Erica L. Groshen & K.C. O'Shaughnessy, 2002. "How New is the "New Employment Contract"? Evidence from North American Pay Practices," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number nec.
  2. Alberto Alesina & George-Marios Angeletos, 2004. "Fairness and Redistribution," NajEcon Working Paper Reviews 122247000000000306,
  3. Baker, George P & Jensen, Michael C & Murphy, Kevin J, 1988. " Compensation and Incentives: Practice vs. Theory," Journal of Finance, American Finance Association, vol. 43(3), pages 593-616, July.
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  5. M. Rabin, 2001. "Incorporating Fairness into Game Theory and Economics," Levine's Working Paper Archive 511, David K. Levine.
  6. Gary Charness & David I. Levine, 2000. "When are layoffs acceptable? Evidence from a quasi-experiment," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 53(3), pages 381-400, April.
  7. Chaness, G. & Levine, D.I., 1999. "Changes in the Employment Contract? Evidence from a Quasi-Experiment," Papers 70, California Berkeley - Institute of Industrial Relations.
  8. 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.
  9. Hall, Robert E, 1982. "The Importance of Lifetime Jobs in the U.S. Economy," American Economic Review, American Economic Association, vol. 72(4), pages 716-24, September.
  10. Jonas Agell, 2002. "On the Determinants of Labour Market Institutions: Rent Seeking vs. Social Insurance," German Economic Review, Verein für Socialpolitik, vol. 3(2), pages 107-135, 05.
  11. Alberto F. Alesina & Edward L. Glaeser & Bruce Sacerdote, 2006. "Work and Leisure in the U.S. and Europe: Why So Different?," NBER Chapters, in: NBER Macroeconomics Annual 2005, Volume 20, pages 1-100 National Bureau of Economic Research, Inc.
  12. Herbert A. Simon, 1991. "Organizations and Markets," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 25-44, Spring.
  13. Addison, John T. & Bellmann, Lutz & Schnabel, Claus & Wagner, Joachim, 2002. "German works councils old and new: incidence, coverage and determinants," Discussion Papers 10, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  14. Oliver E. Williamson & Michael L. Wachter & Jeffrey E. Harris, 1975. "Understanding the Employment Relation: The Analysis of Idiosyncratic Exchange," Bell Journal of Economics, The RAND Corporation, vol. 6(1), pages 250-278, Spring.
  15. Fehr, Ernst & Kirchsteiger, George & Riedl, Arno, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 437-59, May.
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