The Consequences of (De)Regulation on Employment Duration and Efficiency: An Experimental Study

16 Pages Posted: 30 Nov 2012

See all articles by Siegfried Berninghaus

Siegfried Berninghaus

Institut fuer Statistik und Mathematische Wirtscha

Sabrina Bleich

University of Karlsruhe

Werner Guth

Max Planck Institute of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: January 2013

Abstract

If the future market wage is uncertain, engaging in long‐term employment is risky, with the risk depending on how regulated the labor market is. In our experiment long‐term employment can result either from offering long‐term contracts or from repeatedly and mutually opting for rematching. Treatments differ in how regulations restrict the employer's flexibility in adapting the employment contract. All treatments allow for longer contract duration as well as for mutually opting to be rematched. Effort is chosen by employees after a contract is concluded. Treatments vary from no contract flexibility to no restriction at all. Will more (downward) flexibility be used in ongoing employment but reduce labor market efficiency? And will regulation crowd out long‐term employment, in the form of long‐term contracts or voluntary rematching?

JEL Classification: C72, C90, F16, J21, J24, L10

Suggested Citation

Berninghaus, Siegfried and Bleich, Sabrina and Güth, Werner, The Consequences of (De)Regulation on Employment Duration and Efficiency: An Experimental Study (January 2013). Economic Inquiry, Vol. 51, Issue 1, pp. 1050-1065, 2013. Available at SSRN: https://ssrn.com/abstract=2182982 or http://dx.doi.org/10.1111/j.1465-7295.2011.00436.x

Siegfried Berninghaus (Contact Author)

Institut fuer Statistik und Mathematische Wirtscha ( email )

Building 20.21
Universitaet Karlsruhe Gebaeude 20.21
76128 Karlsruhe
Germany

Sabrina Bleich

University of Karlsruhe ( email )

Building 20.21
76128 Karlsruhe
Germany

Werner Güth

Max Planck Institute of Economics ( email )

Kahlaische Strasse 10
D-07745 Jena, 07745
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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