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The quality of employment in the early labour market experience of young Europeans

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  • Luigi Bonatti
  • Lorenza A. Lorenzetti

Abstract

Consistently with the empirical evidence and in contrast with Shapiro & Stiglitz (1984), we demonstrate that worker owned firms exhibit not only more wage flexibility and less employment volatility than investor owned firms, but also lower expected wages than the latter. This is due to the informational advantage enjoyed by the firm's owners relatively to the workers concerning some circumstances that affect the performance of the firm. We show this both in the case in which each investor owned firm offers labor contracts to single workers who act atomistically and in the case in which each investor owned firm negotiates labor conditions with its workers who act as a group (a ''union''). Finally, we show that differences in attitudes towards risk between investor owned firms and their workers are not necessary to explain the typical combination of state-independent wages and cyclical layoffs that characterizes most industries.

Suggested Citation

  • Luigi Bonatti & Lorenza A. Lorenzetti, 2017. "The quality of employment in the early labour market experience of young Europeans," DEM Working Papers 2017/08, Department of Economics and Management.
    • Handle: RePEc:trn:utwprg:2017/08
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    labor demand uncertainty; wage flexibility; labor contracts; asymmetric information; employment volatility; worker co-operatives;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms

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