Estimating the marginal rate of substitution between wage and employment protection

Fabio Berton and Matteo Migheli ()

No 143, LABORatorio R. Revelli Working Papers Series from LABORatorio R. Revelli, Centre for Employment Studies

Abstract: Empirical evidence supports the hypothesis that workers have a strong preference for job security. Building on this, the empirical research focused so far on the analysis of the “port-of-entry hypothesis” – namely on testing whether temporary jobs may act as a springboard towards standard employment relationships – underexploring the issue of what would make workers indifferent between the two options. This is the aim of the present paper. Using a dedicated survey on a random sample of workers from the Italian public employment service, we find that: i) workers actually require a monetary compensation to trade a non-standard job for a standard one; ii) moreover, they display lexicographic preferences over contracts, inasmuch as when they have to compare an open-ended contract to a freelance contract (chosen as the epitome of precariousness in Italy), the compensation they ask for does not depend on contract duration; on the opposite, when they compare open-ended jobs to fixed-term jobs (where only expected duration actually matters) the required compensation does not depend on the type of contract, but only on its planned duration; iii) the estimated MRS between wage and contract duration is 257 more Euros per month to accept a one-year shorter employment relationship.

Keywords: temporary work; compensation; preferences; marginal rate of substitution (search for similar items in EconPapers)
JEL-codes: D03 J33 J41 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-eur
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Working Paper: Estimating the marginal rate of substitution between wage and employment protection (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wplabo:143

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