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Changes in the employment contract?: Evidence from a quasi-experiment

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  • Charness, Gary
  • Levine, David I.

Abstract

Many authors have discussed an apparent shift to a new employment contract characterized by less commitment between employer and employee coupled with closer ties between wages within the enterprise and those in the external labor market. We study the issue of when people in the U.S. and Canada feel pay cuts are fair, comparing our results with those of Kahneman, Knetsch, and Thaler (1986). In contrast to much previous discussion, we find no evidence of increasing acceptance of pay cuts--a measure of whether external, not internal, labor markets are considered fair. These results suggest that new organizational forms might do well to preserve some of the features of the "old" employment contract.
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  • Charness, Gary & Levine, David I., 2002. "Changes in the employment contract?: Evidence from a quasi-experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 47(4), pages 391-405, April.
    • Handle: RePEc:eee:jeborg:v:47:y:2002:i:4:p:391-405
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    1. Gary Charness & David I. Levine, 2000. "When are Layoffs Acceptable? Evidence from a Quasi-Experiment," ILR Review, Cornell University, ILR School, vol. 53(3), pages 381-400, April.
    2. Gary Charness, 2004. "Attribution and Reciprocity in an Experimental Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 665-688, July.
    3. Arnaldo Camuffo, 2002. "The Changing Nature of Internal Labor Markets," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 6(4), pages 281-294, December.
    4. Ananish Chaudhuri & Tony So & Erwann Sbai, 2017. "Pay cuts and layoffs in an experimental minimum effort coordination game," Economics Bulletin, AccessEcon, vol. 37(3), pages 2181-2197.
    5. Verena Utikal & Urs Fischbacher, 2009. "On the attribution of externalities," TWI Research Paper Series 46, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    6. Pfeifer, Christian, 2004. "Fairness und Kündigungen : eine theoretische und empirische Analyse (Fairness and layoffs * a theoretical and empirical analysis)," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 37(2), pages 127-145.
    7. Sohr, Tatjana, 2005. "Wenn die Karriereleiter wegbricht: Fairness und der Abbau von Hierarchieebenen (When the career ladder is removed * fairness and the elimination of hierarchical levels)," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 38(1), pages 68-86.
    8. Christian Koch, 2021. "Can reference points explain wage rigidity? Experimental evidence," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 55(1), pages 1-17, December.
    9. Koch, Christian, 2021. "Can reference points explain wage rigidity? : Experimental evidence," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 55, pages 1-5.
    10. Gerhards, Leonie & Heinz, Matthias, 2017. "In good times and bad – Reciprocal behavior at the workplace in times of economic crises," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 228-239.
    11. Sohr, Tatjana, 2005. "Wenn die Karriereleiter wegbricht: Fairness und der Abbau von Hierarchieebenen (When the career ladder is removed * fairness and the elimination of hierarchical levels)," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 38(1), pages 68-86.
    12. Christian Pfeifer, 2007. "The Perceived Fairness of Layoffs in Germany: Participation, Compensation, or Avoidance?," Journal of Business Ethics, Springer, vol. 74(1), pages 25-36, August.
    13. Eva Labro & James D. Omartian, 2023. "Managing Employee Retention Concerns: Evidence from U.S. Census Data," Working Papers 23-07, Center for Economic Studies, U.S. Census Bureau.
    14. Joana Margarida Sequeira Neto & Etienne Mullet, 2018. "Perceived Acceptability of Organizational Layoffs and Job Alliances During a Recession: A Mapping of Portuguese People’s Views," Journal of Business Ethics, Springer, vol. 152(4), pages 1149-1157, November.
    15. Christian Pfeifer, 2005. "Flexibility, Dual Labour Markets, and Temporary Employment. Empirical Evidence from German Establishment Data," management revue. Socio-economic Studies, Rainer Hampp Verlag, vol. 16(3), pages 404-422.
    16. repec:iab:iabjlr:v:55:i::p:art.5 is not listed on IDEAS
    17. Gerlach, Knut & Levine, David I. & Stephan, Gesine & Struck, Olaf, 2005. "The Acceptability of Layoffs and Pay Cuts: Comparing North America with Germany," Institute for Research on Labor and Employment, Working Paper Series qt1k21d0rg, Institute of Industrial Relations, UC Berkeley.
    18. Danielson, Anders J. & Holm, Hakan J., 2007. "Do you trust your brethren?: Eliciting trust attitudes and trust behavior in a Tanzanian congregation," Journal of Economic Behavior & Organization, Elsevier, vol. 62(2), pages 255-271, February.
    19. Gesine Stephan & Sven Uthmann, 2014. "Wann wird negative Reziprozität am Arbeitsplatz akzeptiert? Eine quasi-experimentelle Untersuchung," Working Paper Series in Economics 321, University of Lüneburg, Institute of Economics.
    20. Stephan, Gesine, 2006. "Fair geht vor: Was die Leute von Entlassungen und Lohnkürzungen halten," IAB-Kurzbericht 200601, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    21. Koch, Christian, 2021. "Can reference points explain wage rigidity? : Experimental evidence," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 55(55), pages 1-.5.
    22. Sohr, Tatjana, 2005. "Wenn die Karriereleiter wegbricht: Fairness und der Abbau von Hierarchieebenen (When the career ladder is removed * fairness and the elimination of hierarchical levels)," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 38(1), pages 68-86.
    23. Michael Christensen & Thorbjørn Knudsen, 2006. "Evaluation of Uncertain International Markets The Advantage of Flexible Organization Structures," DRUID Working Papers 06-04, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    24. Pfeifer, Christian, 2004. "Fairness und Kündigungen : eine theoretische und empirische Analyse (Fairness and layoffs * a theoretical and empirical analysis)," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 37(2), pages 127-145.

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    More about this item

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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