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Zero-hours Contracts in a Frictional Labor Market

Author

Listed:
  • Dolado, Juan J
  • Lalé, Etienne
  • Turon, Hélène

Abstract

We propose a model to evaluate the U.K.’s zero-hours contract (ZHC) – a contract that exempts employers from the requirement to provide any minimum working hours, and allows employees to decline any workload. We find quantitatively that ZHCs improve welfare by enabling firms with more volatile business conditions to create additional jobs. While weaker than job creation, substitution effects – some jobs that are otherwise viable under regular contracts are advertised as ZHCs – are sizable and likely explain negative reactions against ZHCs. Our model also assesses increased labor-force participation from ZHCs which appeal to individuals who prefer flexible work schedules.

Suggested Citation

  • Dolado, Juan J & Lalé, Etienne & Turon, Hélène, 2021. "Zero-hours Contracts in a Frictional Labor Market," CEPR Discussion Papers 16843, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16843
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    Cited by:

    1. Pauline Carry, 2022. "The Effects of the Legal Minimum Working Time on Workers, Firms and the Labor Market," SciencePo Working papers Main hal-04067393, HAL.
    2. Garcia-Louzao, Jose & Hospido, Laura & Ruggieri, Alessandro, 2023. "Dual returns to experience," Labour Economics, Elsevier, vol. 80(C).
    3. Pauline Carry, 2022. "The Effects of the Legal Minimum Working Time on Workers, Firms and the Labor Market," Working Papers hal-04067393, HAL.

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    More about this item

    Keywords

    Zero-hours contracts; Working hours; Gig economy; Flexibility;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services

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