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Essays on Delegated Search and Temporary Work Agencies




Paper [I] models a game, where two temporary work agencies (TWAs) compete to fill a vacancy at a client firm (CF). They simultaneously choose how much effort to expend, based on their expectation of how good their opponents best candidate will be. I then show that this will make the TWAs overconfident, as the rational way of judging your own probability of winning is not looking at the opponents expected best, but comparing how much effort your opponent will expend. Paper [II] examines the misaligned incentives in the temporary work agency sector, where we first look at pure recruiting contracts, that either require payment on delivery, or payment on some specified point in time. We then look at the incentives of recruit-and-rent contracts, where the worker is leased to the client firm. We assume that the better the worker, the higher the probability that the client firm is going to want to hire him/her. If that happens then the TWA will no onger get revenues from said worker, incentivizing the TWA to not always deliver the first match it finds, if it is too good. Lastly we look at how competition can dampen this perverse incentive. Paper [III] models the waiting behavior that can occur if a TWA is contracted to find a worker for a specific time far in the future; the TWA will postpone effort. This behavior is modeled for two types of TWAs; one that is rational and plans ahead, and another that does not plan ahead at all, but instead only looks at the immediate future. I find that the one that only looks at the immediate future starts exerting effort earlier than the planner. After looking at optimal contracts under perfect monitoring and hidden action I provide two extensions. I first show that for the principal to want to delegate search to a rational TWA, the agent has to be better than the CF, by some factor, as it has to make up in efficiency what the principal loses in moral hazard, when the agent waits longer than the principal would like it to. Lastly I prove that it is profit maximizing for the principal to contract one agent and give it a deadline earlier than when the principal would need the worker, and then replace that agent with a competitor if the first one has not succeeded by that earlier deadline. Paper [IV] estimates at the effect of family experience on relative transition probability into the temporary work agency sector. Using register data for all of Sweden we run a bias-reduced logistic regression, where we include various factors that affect the probability of young adults (aged 18-34) entering the sector. This paper ties in to the literature on occupational inheritance, as well as the literature on changing social norms. We find that having had a parent, sibling or partner in the TWA sector increases your probability of entering the sector yourself.

Suggested Citation

  • Raattamaa, Tomas, 2016. "Essays on Delegated Search and Temporary Work Agencies," Umeå Economic Studies 935, Umeå University, Department of Economics.
  • Handle: RePEc:hhs:umnees:0935

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    References listed on IDEAS

    1. Jahn, Elke J. & Rosholm, Michael, 2010. "Looking beyond the bridge: How temporary agency employment affects labor market outcomes," IAB Discussion Paper 201009, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    2. Ghalwash, Tarek, 2006. "Income, Energy Taxation, and the Environment: An Econometric Analysis," Umeå Economic Studies 678, Umeå University, Department of Economics.
    3. Widerstedt, Barbro, 1998. "Moving or Staying? Job Mobility as a Sorting Process," Umeå Economic Studies 464, Umeå University, Department of Economics.
    4. Autor, David H. (ed.), 2009. "Studies of Labor Market Intermediation," National Bureau of Economic Research Books, University of Chicago Press, number 9780226032887, October.
    5. Rashid, Saman, 2004. "Immigrants' Income and Family Migration," Umeå Economic Studies 625, Umeå University, Department of Economics.
    6. David H. Autor, 2009. "Introduction to "Studies of Labor Market Intermediation"," NBER Chapters,in: Studies of Labor Market Intermediation, pages 1-23 National Bureau of Economic Research, Inc.
    7. Quoreshi, Shahiduzzaman, 2005. "Modelling High Frequency Financial Count Data," Umeå Economic Studies 656, Umeå University, Department of Economics.
    8. Nilsson, William, 2005. "Equality of Opportunity, Heterogeneity and Poverty," Umeå Economic Studies 652, Umeå University, Department of Economics.
    9. Quoreshi, Shahiduzzaman, 2006. "Time Series Modelling Of High Frequency Stock Transaction Data," Umeå Economic Studies 675, Umeå University, Department of Economics.
    10. David H. Autor, 2009. "Studies of Labor Market Intermediation," NBER Books, National Bureau of Economic Research, Inc, number auto07-1, December.
    11. Paul Gregg & Lindsey Macmillan & Bilal Nasim, 2012. "The Impact of Fathers' Job Loss during the Recession of the 1980s on their Children's Educational Attainment and Labour Market Outcomes," Fiscal Studies, Institute for Fiscal Studies, vol. 33(2), pages 237-264, June.
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    More about this item


    delegated search; principal-agent; matching; transition probability; temporary work agencies;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations

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