The Misaligned Incentives of Temporary Work Agencies and their Client Firms

Morgan Westéus () and Tomas Raattamaa ()
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Morgan Westéus: Department of Economics, Umeå School of Business and Economics, Postal: Umeå University, S 901 87 Umeå, Sweden
Tomas Raattamaa: Department of Economics, Umeå School of Business and Economics, Postal: Umeå University, S 901 87 Umeå, Sweden

No 896, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: This paper adds to the theoretical literature on the incentives of Temporary Work Agencies (TWAs). Using a principal-agent model with hidden action to analyse two main types of contracts between a TWA and a Client Firm (CF), the TWA is shown to potentially act against the best interest of the CF when helping to fill a vacant position. The results also suggest that the adverse effect of the incentive misalignment is larger when workers are leased rather than hired by the CF. However, this effect could potentially be offset by introducing a sufficient level of competition among TWAs.

Keywords: Temporary work agency; client firm; incentives; matching; contracts (search for similar items in EconPapers)
JEL-codes: J41 J44 J64 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2014-11-12
New Economics Papers: this item is included in nep-cta, nep-hrm and nep-lab
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:umnees:0896

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