Short-Time Compensation: Job Security, and Employment Contracts: Evidence from Selected OECD Countries

Marc A Van Audenrode

Journal of Political Economy, 1994, vol. 102, issue 1, 76-102

Abstract: In this paper, a model of optimal employment contracting describes differences across countries in firing restrictions and short-time compensation systems for workers forced to work shorter hours to avoid layoff. The model predicts that the existence of a short-time compensation system will generate major fluctuations in working hours only if the short-time compensation system is more generous than the traditional unemployment insurance system. A test performed for ten OECD countries shows that in countries with generous short-time compensation systems, the speed of adjustment of total hours worked is higher than in the United States, despite a much slower adjustment in the number of workers employed. Copyright 1994 by University of Chicago Press.

Date: 1994
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