Optimal coexistence of long-term and short-term contracts in labor Markets
Macho-Stadler, Inés
Pérez-Castrillo, David
Porteiro Fresco, Nicolás
Universitat Autònoma de Barcelona. Unitat de Fonaments de l'Anàlisi Econòmica
Institut d'Anàlisi Econòmica

Date: 2011
Description: 41 p.
Abstract: We consider a market where firms hire workers to run their projects and such projects differ in profitability. At any period, each firm needs two workers to successfully run its project: a junior agent, with no specific skills, and a senior worker, whose effort is not verifiable. Senior workers differ in ability and their competence is revealed after they have worked as juniors in the market. We study the length of the contractual relationships between firms and workers in an environment where the matching between firms and workers is the result of market interaction. We show that, despite in a one-firm-one-worker set-up long-term contracts are the optimal choice for firms, market forces often induce firms to use short-term contracts. Unless the market only consists of firms with very profitable projects, firms operating highly profitable projects offer short-term contracts to ensure the service of high-ability workers and those with less lucrative projects also use short-term contracts to save on the junior workers' wage. Intermediate firms may (or may not) hire workers through long-term contracts.
Rights: Aquest document està subjecte a una llicència d'ús de Creative Commons, amb la qual es permet copiar, distribuir i comunicar públicament l'obra sempre que se'n citin l'autor original, la universitat, la unitat i l'institut i no se'n faci cap ús comercial ni obra derivada, tal com queda estipulat en la llicència d'ús Creative Commons
Language: Anglès.
Series: Working papers
Series: Working papers ; 872.11
Document: workingPaper
Subject: Mercat de treball ; Contractes de treball ; Models matemàtics

Adreça alternativa: https://hdl.handle.net/2072/152047

41 p, 384.9 KB

The record appears in these collections:
Research literature > Working papers

 Record created 2011-06-10, last modified 2019-02-02

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