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

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  • Bassanini, Andrea

    (OECD)

  • Caroli, Eve

    (Université Paris-Dauphine)

  • Fontaine, Francois

    (Paris School of Economics)

  • Rebérioux, Antoine

    (Université de Paris)

Abstract

We develop a simple theoretical model showing that, by adding to the adjustment costs associated with permanent contracts, local social pressure against dismissals creates an incentive for CEOs to rely on fixed-term contracts, in an attempt to escape social pressure. Using linked employer-employee data, 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 and the CEO not only works but also lives there. We show that these findings can only be explained by local social pressure.

Suggested Citation

  • Bassanini, Andrea & Caroli, Eve & Fontaine, Francois & Rebérioux, Antoine, 2021. "Escaping Social Pressure: Fixed-Term Contracts in Multi-Establishment Firms," IZA Discussion Papers 14029, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp14029
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    More about this item

    Keywords

    social pressure; employment contracts; adjustment costs; CEO reputation;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M55 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Contracting Devices
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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