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Job Protection versus Contracts At‐Will: Trading‐Off Entrenchment and Shirking

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  • Roman Inderst

Abstract

I compare two types of employment contracts: those offering job protection and at‐will contracts. Their respective performances reveal the following trade‐off: at‐will contracts provide cheaper incentives for agents not to shirk, but they can induce the opportunistic actions of agents to make themselves less dispensable (“entrenchment”). One implication of the model is that more senior managers, such as chief executive officers, should receive more protection, for example, through contracts that are explicitly not at‐will or contracts that specify a longer duration.

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  • Roman Inderst, 2017. "Job Protection versus Contracts At‐Will: Trading‐Off Entrenchment and Shirking," Scandinavian Journal of Economics, Wiley Blackwell, vol. 119(4), pages 939-961, October.
    • Handle: RePEc:bla:scandj:v:119:y:2017:i:4:p:939-961
    DOI: 10.1111/sjoe.12202
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