Short or long-term contract? Firm’s optimal choice

Paolini, Dimitri and Tena, Juan de Dios ORCID: 0000-0001-8281-2886
(2012) Short or long-term contract? Firm’s optimal choice. Empirica, 39 (1). pp. 1-18.

[img] Text
empirica_2012.pdf - Unspecified

Download (423kB)


This article studies the behaviour of a firm searching to fill a vacancy. The main assumption is that the firm can offer two different kinds of contracts to the workers, either a short-term contract or a long-term one. The short-term contract acts as a probationary stage in which the firm can learn about the worker. After this stage, the firm can propose a long-term contract to the worker or it can decide to look for another worker. We show that, if the short-term wage is fixed endogenously, it can be optimal for firms to start a working relationship with a short-term contract, but that this policy decreases unemployment and welfare. On the contrary, if the wage is fixed exogenously, this policy could be optimal also from a welfare point of view. © 2011 Springer Science+Business Media, LLC.

Item Type: Article
Depositing User: Symplectic Admin
Date Deposited: 22 Sep 2015 09:56
Last Modified: 17 Dec 2022 01:34
DOI: 10.1007/s10663-010-9152-1
Related URLs: