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Deregulation of temporary agency employment in a unionized economy: Does this really lead to a substitution of regular employment?

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  • Baudy, Philipp
  • Cords, Dario

Abstract

There have been continuous deregulation efforts concerning temporary agency employment in almost all European countries aiming at an increasing flexibility in the European labor markets. This paper theoretically investigates the effects of a legal deregulation of temporary agency employment on wage setting and the employment structure in a unionized economy with labor market frictions. Multiple-worker firms bargain simultaneously with temporary agencies and labor unions to determine the respective labor costs. It is shown that there is a hump-shaped relationship between the degree of legal deregulation of temporary agency employment and the rate of temporary employment used in the production process. Temporary agency employment may even decrease despite its deregulation. Furthermore, regular employment monotonically increases, while individual workers and labor unions suffer from deregulation due to declining wages and a reduction in labor union's utility.

Suggested Citation

  • Baudy, Philipp & Cords, Dario, 2016. "Deregulation of temporary agency employment in a unionized economy: Does this really lead to a substitution of regular employment?," Hohenheim Discussion Papers in Business, Economics and Social Sciences 06-2016, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    • Handle: RePEc:zbw:hohdps:062016
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    References listed on IDEAS

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    More about this item

    Keywords

    Matching Theory; Labor Unions; Temporary Agency Work; Wage-Setting Process;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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