European Business Schools Librarian's Group
Working Papers,
University of Aarhus, Aarhus School of Business, Department of Economics
No 08-6: Job Security as an Endogenous Job Characteristic
Elke J. Jahn () and Thomas Wagner ()
Additional contact information
Elke J. Jahn: Department of Economics, Aarhus School of Business, Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
Thomas Wagner: University of Applied Sciences, Postal: Burgschmietstr. 18, 90419 Nuremberg, Germany,
Abstract: This paper develops a hedonic model of job security (JS). Workers with heterogeneous JS-preferences pay the hedonic price for JS to employers, who incur labor-hoarding costs from supplying JS. In contrast to the Wage-Bill Argument, equilibrium unemployment is strictly positive, as workers with weak JS-preferences trade JS for higher wages. The relation between optimal job insecurity and the perceived dismissal probability is hump-shaped. If firms observe demand, but workers do not, separation is not contractible and firms dismiss workers at-will. Although the workers are risk-averse, they respond to the one-sided private information by trading wage-risk for a higher JS. With two-sided private information, even JS-neutral workers pay the price for a JS guarantee, if their risk premium associated with the wage-replacement risk is larger than the social net loss from production.
Keywords: job security; hedonic market; implicit contract theory; guaranteed employment contract; severance pay contract; asymmetric information; prudence
50 pages, April 1, 2008
Full text files
08-6_elja.pdf
Questions (including download problems) about the papers in this series should be directed to Helle Vinbaek Stenholt ()
Report other problems with accessing this service to Sune Karlsson ().
This page generated on 2024-02-12 04:36:19.