Free DP Download 15 February 2022 - Zero-hours Contracts in a Frictional Labor Market

Tuesday, February 15, 2022

Juan J. Dolado, Etienne Lale, Hélène Turon CEPR Discussion Paper No. 16843 | December 2021


We propose a model to evaluate the U.K.'s zero-hours contract (ZHC) - a contract that exempts employers from the requirement to provide any minimum working hours, and allows employees to decline any workload. We find quantitatively that ZHCs improve welfare by enabling firms with more volatile business conditions to create additional jobs. While weaker than job creation, substitution effects - some jobs that are otherwise viable under regular contracts are advertised as ZHCs - are sizable and likely explain negative reactions against ZHCs. Our model also assesses increased labor-force participation from ZHCs which appeal to individuals who prefer flexible work schedules.

You can now watch a video where Juan Dolado tells Tim Phillips about this research.