2020
DOI: 10.1111/meca.12303
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The determinants of employers’ use of temporary contracts in the frictional labor market

Abstract: This paper seeks to theoretically-and, in part, numerically-examine the determinants of employers' choice of temporary contracts as flexible employment adjustment or screening tools (hereafter, "the flexibility purpose" and "the screening purpose," respectively). This paper considers the following research question: Under what circumstances do more employers prefer screening rather than flexibility? Liberalizing labor markets by introducing flexible employment contracts or relaxing firing regulations for perma… Show more

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Cited by 5 publications
(5 citation statements)
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References 42 publications
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“…Employers tend to save money on wages (Fuller and Vosko, 2008; Ono and Sullivan, 2013), training (Finegold, 2005; Wiens-Tuers and Hill, 2002), social security and benefits costs (Houseman, 2001). They may also avoid legal liabilities such as severance payments (Masui, 2020) and unionization efforts through the extensive use of temporary workers (Hatton, 2014).…”
Section: Previous Researchmentioning
confidence: 99%
“…Employers tend to save money on wages (Fuller and Vosko, 2008; Ono and Sullivan, 2013), training (Finegold, 2005; Wiens-Tuers and Hill, 2002), social security and benefits costs (Houseman, 2001). They may also avoid legal liabilities such as severance payments (Masui, 2020) and unionization efforts through the extensive use of temporary workers (Hatton, 2014).…”
Section: Previous Researchmentioning
confidence: 99%
“…A second practice that gives insights in which strategies employers may have for their use of non-standard employment is the transition rate from fixed-term to permanent employment (Masui, 2020). In firms that use non-standard employment to screen workers, this transition rate will be high, as good applicants typically pass the screening procedure.…”
Section: Detecting Employers' Non-standard Employment Strategiesmentioning
confidence: 99%
“…Literature [12] demonstrates experimentally that lowering employment protection for permanent positions, reducing benefits for unemployed workers, and increasing the probability of switching from temporary to permanent workers all increase the relative proportion of employers who use temporary contracts as a screening tool. Literature [13] mentions that improvements in the legal environment may better protect investors in specialized assets and provide them with stronger incentives to invest in specialization, thus contributing to an increase in the overall level of specialization in the economy and an increase in labor productivity.…”
Section: Introductionmentioning
confidence: 99%