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Escaping Social Pressure: Fixed-Term Contracts in Multi-Establishment Firms

Author

Listed:
  • Andrea Bassanini

    () (OCDE - Organisation de Coopération et de Développement Economiques)

  • Eve Caroli

    () (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, LEDa - Laboratoire d'Economie de Dauphine - Université Paris-Dauphine)

  • François Fontaine

    (PSE - Paris School of Economics)

  • Antoine Rebérioux

    () (LADYSS - Laboratoire dynamiques sociales et recomposition des espaces - UP1 - Université Panthéon-Sorbonne - UP8 - Université Paris 8 Vincennes-Saint-Denis - UPN - Université Paris Nanterre - UPD7 - Université Paris Diderot - Paris 7 - CNRS - Centre National de la Recherche Scientifique)

Abstract

We investigate the impact of local social pressure against dismissals on the choice of employment contracts made by firms using French linked employer-employee data. Taking into account the potential endogeneity of plant location, we show that establishments located closer to headquarters have higher shares of fixed-term contracts in hiring than those located further away whenever firms' headquarters are located in self-centered communities. We also show that this relationship is driven by firms that are highly visible in the community of the headquarters and whose CEOs not only work but also live there. In contrast, when firms' headquarters belong to communities that are not self-centered, the impact of distance to headquarters on the share of fixed-term contracts turns out to be positive. We show that these findings can only be explained by local social pressure. When the local community at the firm's headquarters is self-centered, CEOs are under pressure to avoid dismissing workers close to headquarters. By adding to the adjustment costs associated with open-ended contracts, this creates an incentive for CEOs to rely more on fixed-term contracts, in an attempt to escape social pressure.

Suggested Citation

  • Andrea Bassanini & Eve Caroli & François Fontaine & Antoine Rebérioux, 2019. "Escaping Social Pressure: Fixed-Term Contracts in Multi-Establishment Firms," PSE Working Papers halshs-01724188, HAL.
  • Handle: RePEc:hal:psewpa:halshs-01724188
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01724188v2
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    References listed on IDEAS

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    More about this item

    Keywords

    R12; M55; social pressure; employment contracts; adjustment costs; CEO reputation; J23; M14;

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • M55 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Contracting Devices
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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