DP4178 Temporary Contracts and Employee Effort

Author(s): Axel Engellandt, Regina Riphahn
Publication Date: January 2004
Keyword(s): absenteeism, career concerns, contract-based incentives, M50, moral hazard, overtime, temporary work
JEL(s): C25, J24, J41
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=4178

Temporary contracts provide employers with a tool to screen potential new employees and have been shown to provide ‘stepping stones’ into permanent employment for workers. For both reasons, workers on temporary contracts have an incentive to provide more effort than permanent employees. Using indicators for unpaid overtime work and absences taken from the Swiss Labor Force Survey, we present evidence that temporary workers indeed provide higher effort than permanent employees: their probability of working unpaid overtime exceeds that of permanently employed workers by 60%. We show the heterogeneity of this effect across different types of temporary contracts, investigate differences between men and women, and discuss the relevance of endogenous selection into temporary employment.