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Temporary Contracts and Monopsony Power in the UK Labour Market

  • Tabasso, Domenico

    ()

    (University of Geneva)

This paper addresses the applicability of the theory of equalizing differences (Rosen, 1987) in a market in which temporary and permanent workers co-exist. The assumption of perfect competition in the labour market is directly questioned and a model is developed in which the labour market is described as a duopsony and the relation between wage and non-monetary job characteristics is studied for workers with different contract lengths. The empirical analysis, based on several waves of the UK Labour Force Data, confirms several of the hypotheses suggested by the model and emphasizes how in the short run workers who have experienced a change in their employer can expect a career trajectory in line with the theory on compensating differentials. In particular, while the wage dynamic related to workers shifting from a temporary contract to another temporary position cannot be exactly predicted, shifts from temporary to permanent contracts tend to be linked to a reduction in wages and a simultaneous increase in travel-to-work distance. Nonetheless, when unobserved characteristics are accounted for in the selection process into temporary contracts, these results lose significance and only a positive relation between wage and commuting time persists, irrespective of the type of contract.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5867.

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Length: 39 pages
Date of creation: Jul 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5867
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  1. Fabio Berton & Pietro Garibladi, 2006. "Workers and Firms Sorting into Temporary Jobs," LABORatorio R. Revelli Working Papers Series 51, LABORatorio R. Revelli, Centre for Employment Studies.
  2. Joseph G. Altonji & Nicolas Williams, 2005. "Do wages rise with job seniority? A reassessment," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 58(3), pages 370-397, April.
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  16. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "The Distribution of Earnings in an Equilibrium Search Model with State-Dependent Offers and Counteroffers," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00357753, HAL.
  17. Matteo PICCHIO, 2006. "Wage Differentials between Temporary and Permanent Workers in Italy," Working Papers 257, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  18. repec:oup:restud:v:54:y:1987:i:3:p:437-59 is not listed on IDEAS
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  22. Maia Güell & Barbara Petrongolo, 2000. "Workers Transitions from Temporary to Permanent Employment: the Spanish Case," CEP Discussion Papers dp0438, Centre for Economic Performance, LSE.
  23. Michael R. Ransom & Ronald L. Oaxaca, 2008. "New Market Power Models and Sex Differences in Pay," Working Papers 1110, Princeton University, Department of Economics, Industrial Relations Section..
  24. Tito Boeri & Pietro Garibaldi, 2007. "Two Tier Reforms of Employment Protection: A Honeymoon Effect?," Carlo Alberto Notebooks 37, Collegio Carlo Alberto.
  25. Bhaskar, V & To, Ted, 1999. "Minimum Wages for Ronald McDonald Monopsonies: A Theory of Monopsonistic Competition," Economic Journal, Royal Economic Society, vol. 109(455), pages 190-203, April.
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  27. Booth, Alison L. & Francesconi, Marco & Frank, Jeff, 2000. "Temporary jobs: who gets them, what are they worth, and do they lead anywhere?," ISER Working Paper Series 2000-13, Institute for Social and Economic Research.
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