We investigate a number of canonical predictions that arise from relational contract theory. Employing an experimental design with endogenous choice of contract type, we find considerable experimental support for several well-established predictions, including the importance of self-enforcement and individual rationality constraints for contractual performance; a preference for informal agreements when third-party verification of performance is coarse; and a tendency toward strategic ambiguity (Bernheim and Whinston Am Econ Rev 88(4):902–932, 1998). However, two findings that appear to be inconsistent with theory are that (1) contractually specified performance levels do not appear to respond to the discount factor though realized performance does; and (2) subjects often apply inefficient punishments following a deviation. By providing evidence on the strengths and weaknesses of standard relational contract theory, our study shows where there is room for improvement. We conjecture that incorporating social preferences and semi-grim strategies (Breitmoser Am Econ Rev 105(9):2882–2910, 2015) can potentially address the observed weaknesses.

We introduce the “ball-catching task”, a novel computerized task, which combines a tangible action (“catching balls”) with induced material cost of effort. The central feature of the ball-catching task is that it allows researchers to manipulate the cost of effort function as well as the production function, which permits quantitative predictions on effort provision. In an experiment with piece-rate incentives we find that the comparative static and the point predictions on effort provision are remarkably accurate. We also present experimental findings from three classic experiments, namely, team production, gift exchange and tournament, using the task. All of the results are closely in line with the stylized facts from experiments using purely induced values. We conclude that the ball-catching task combines the advantages of real effort tasks with the use of induced values, which is useful for theory-testing purposes as well as for applications.

We study behavior within a simple principal-agent experiment. Our design allows for a large class of linear contracts. Principals can offer any feasible combination of (negative) fixed wages and incentives in the form of return sharing. This great contractual flexibility allows us to study incentive compatibility simultaneously with issues of ‘fair sharing’ and reciprocity, which were previously found to be important. We find a high degree of incentive-compatible behavior, but also ‘fair sharing’ and reciprocity. In contrast to other incentive devices studied in the literature, the incentives are ‘reciprocity-compatible’. Principals recognize the agency problem and react accordingly.

The extant microeconomic literature on matching markets assumes ordinal preferences for matches, while bargaining within matches is mostly excluded. Central for this paper, however, is bargaining over joint profits from potential matches. We investigate, both theoretically and experimentally, a seemingly simple allocation task in a 2 × 2 market with repeated negotiations. When inefficiency is possible, about 1/3 of the complete matches are inefficient and, overall, more than 3/4 of the experimental allocations are unstable. These results strongly contradict existing bargaining theories requiring efficient matches. Even with regard to efficient matches, the tested theories perform poorly. Standard bargaining and behavioral concepts, such as Selten's (1972) Equal Division Core, are outperformed by the simplistic ɛ-Equal Split, i.e., an equal split of the joint profit plus/minus ɛ.

We devise an experiment to explore the effect of different degrees of bargaining power on the design and the selection of contracts in a hidden-information context. In our benchmark case, each principal is matched with one agent of unknown type. In our second treatment, a principal can select one of three agents, while in a third treatment an agent may choose between the contract menus offered by two principals. We first show theoretically how different ratios of principals and agents affect outcomes and efficiency. Informational asymmetries generate inefficiency. In an environment where principals compete against each other to hire agents, these inefficiencies may disappear, but they are insensitive to the number of principals. In contrast, when agents compete to be hired, efficiency improves dramatically, and it increases in the relative number of agents because competition reduces the agents’ informational monopoly power. However, this environment also generates a high inequality level and is characterized by multiple equilibria. In general, there is a fairly high degree of correspondence between the theoretical predictions and the contract menus actually chosen in each treatment. There is, however, a tendency to choose more ‘generous’ (and more efficient) contract menus over time. We find that competition leads to a substantially higher probability of trade, and that, overall, competition between agents generates the most efficient outcomes.

We make two main contributions in this article. We examine whether social comparisons affects workers’ performance when a firm can choose workers’ wages or let them choose their own. Firms can delegate the wage decision to neither, one or both workers in the firm. We vary the information workers receive, finding that social comparisons concerning both wages and decision rights affect workers’ performance. Our second contribution is methodological. We find that our treatment effects are present with both stated effort and a real-effort task, which suggests that both approaches may yield similar results in labor experiments.

Firms face an optimization problem that requires a maximal quantity output given a quality constraint. But how do firms incentivize quantity and quality to meet these dual goals, and what role do behavioral factors, such as loss aversion, play in the tradeoffs workers face? We address these questions with a theoretical model and an experiment in which participants are paid for both quantity and quality of a real effort task. Consistent with basic economic theory, higher quality incentives encourage participants to shift their attention from quantity to quality. However, we also find that loss averse participants shift their attention from quality to quantity to a greater degree when quality is weakly incentivized. These results can inform managers of appropriate ways to structure contracts, and suggest benefits to personalizing contracts based on individual behavioral characteristics.

This article adopts a labour process theory approach to analysing distinct circuits of labour control in platform video game work in China, a novel manifestation of the platform economy rooted in the special formation of Chinese gaming infrastructure as well as in precarious labour regimes. Platform game work encompasses a broad range of online video game services such as live game streaming, paid boosting, and game companion, matching customers’ demands to workers who provide entertainment or assist play. Platform game work has drawn an estimated seven million young workers into precarious employment during the past decade. The article outlines three interwoven features defining the fragmented control of platform game work: the crucial function of extra-platform intermediaries in regulating labour processes; the deployment of relationship labour in order matching and community management; and the mutual reinforcement of platform diversity and fast-moving platform architecture. These three features co-create a decentralised yet resilient structure organised by a network of platform and non-platform, human and machine agencies. Positioning platform game work in the broad spectrum of gig work, the article illuminates new modes of labour control and workers’ embedded agency, adding to the nascent literature on diverse labour regimes and subjectivities in the platform economy.

The use of part-time jobs is steadily increasing in most advanced economies. Previous literature has concluded that part-time workers suffer a wage penalty, but its magnitude varies across studies and countries. The part-time penalty is the otherwise unexplained element of the gap between full-time and part-time hourly earnings. One potential factor accounting for international differences in this penalty is the coverage of collective bargaining. This article outlines research examining wage differences between part-time and full-time male and female workers in Spain, a country with a very high level of coverage of collective agreements but very heterogeneous regional labour markets. Results are obtained using an econometric decomposition specifically adapted to matched employer–employee data. They show that intra-firm wage differentials for part- and full-time workers with the same characteristics are negligible. But results that are perhaps less expected are those based on the regional analysis – an unprecedented perspective compared with the previous literature. These results show that despite very significant differences in economies and labour markets, observed wage gaps between part-time and full-time workers in each Spanish region are also mainly explained by different endowments of individual, job and firm characteristics. Overall, our evidence highlights the over-riding role of wage setting mechanisms, specifically collective bargaining coverage, in minimising inter-regional differences in the wage penalty of part-time workers.

The increase in regular wage employment in the Indian economy between 2004–2005 and 2011–2012 was accompanied by a significant deterioration in job security; more workers found themselves on short-term and insecure contracts – a continuing trend. Insecurity of tenure results in a significant wage penalty for short-term workers, compared with those with longer term contracts. This article estimates the negative effect of short-term contracts on the wages of Indian regular wage workers all along the income distribution – unlike earlier studies – using the method of unconditional quantile regressions on data from the 68th round and the 61st round of the National Sample Survey Organisation on Employment covering the period 2004–2005 and 2011–2012. It finds that the wage penalty due to short-term contracts is higher for high-wage workers than for low-wage workers, with the maximum impact felt by median wage workers, and has increased for higher paid workers from 2004–2005 to 2011–2012. The spread of informal employment arrangements within India’s formal labour markets has resulted in an increasingly unequal distribution of workers’ access to the benefits of growth, reflecting a shift in power in favour of capital. These findings, specific to a developing economy like India, stand in contrast with studies in European countries, where high-wage workers do not face as much of a penalty for short-term contract work as low-wage workers.

During its transition to a market economy, structural inequalities became increasingly apparent across China’s workforce, threatening social harmony. China’s 2008 Employment Contract Law, legislated amid policy debate, was intended to remedy these phenomena. We examine a crucial element of its remit: has its promotion of continuing contracts as against fixed-term employment contracts been effective? This is crucial for improving workers’ rights through secure employment. How have employers responded to this challenge to their prerogatives in terms of hiring and firing? We analysed data from 2007 and 2012 drawn from All-China Federation of Trade Unions surveys, which cover approximately 80,000 individuals. Using institutional theory, we discuss a variety of employer responses. We find that the Employment Contract Law has increased the likelihood of signing continuing contracts among migrant workers, employees in privately owned enterprises, and those with lower professional titles and who are short-term employees – all disadvantaged labour market categories previously. It has also significantly narrowed gaps regarding access to continuing contracts between these categories and matched advantaged ones. There is also evidence that some employers seek to avoid or sidestep compliance through cost-minimising worker engagement strategies.

Financialisation and financial risk have become current buzzwords, but the connections between finance and labour are not well developed. Often labour is cast simply as the distributional victim of developments like shareholder value, the privatisation of public infrastructure and labour market reform. This article engages developments in the construction industry and locates a growing financial logic inside ‘production’ and work in that sector. Through the concepts of liquidity and risk, we identify causal connections, not just parallels, between financial innovation and the reorganisation of the logic and structure of work in the Australian construction and property services industry.

As economies transition from industrial to post-industrial, the types of jobs available and employment conditions change. Research indicates that youth employment has been negatively impacted by these changes. For young people seeking to enter the labour market, particularly those combining employment and study, precarious employment has become the norm. However, precarious employment is, for many, no longer a stepping stone on the path to permanent employment. Many young Australians, even those with higher education qualifications, experience prolonged periods of precarious employment. To examine how new employment landscapes are experienced by young workers, we conduct analysis of data collected by the Life Pattern Project, a longitudinal mixed-methods study. Our results show that precarious employment is related to lower levels of job satisfaction and autonomy in young adulthood.

The term ‘precarious employment’ is widely used to describe irregular and insecure work arrangements that have grown substantially in both rich and poor countries since the late 1970s. Like the term ‘contingent work’, precarious employment has been adopted and increasingly used by academic researchers and later policymakers since the 1980s. However, the term has deeper historical roots and its recent use can be more accurately seen as a revival as labour markets have taken on some features characteristic of an earlier period. This article examines the use of the term ‘precarious employment’ in political and public debate in the century or more prior to the 1930s, finding that in key respects, this use mirrors contemporary debates. Recognising that precarious employment was a pervasive feature of labour markets in developed countries prior to World War Two has a number of major benefits for contemporary debates. These include a better understanding of the policies that shape the extent of precarious employment. Historical evidence also provides a guide for and reinforcement of a growing body of contemporary research, pointing to both the immediate and broader social effects of precarious employment.

An established tenet of the literature is that the use of flexible labor leads to less innovation. Yet, less attention has been paid to the possibility that it is the decision to innovate that generates the incentive to hire on a permanent basis. The goal of this paper is to show the existence of interlocking complementarities between the firm's technological and hiring strategies. To do so, we develop a simple model where the workers’ decision to invest in human capital is affected by the type of employment contract (temporary versus permanent) and by the type of technological investments (routine versus innovative). When the firm is unable to coordinate its actions across these different domains, two equilibria simultaneously exist: in the ‘high-road’ equilibrium, firms invest more in innovative projects and hire on a permanent basis; in the ‘low-road’ equilibrium, they invest more in routine projects and hire on a temporary basis.

Dans la plupart des pays européens, la redéfinition du contrat de travail et de ses modalités de rupture est au cœur des débats contemporains de politique économique du marché du travail. Ces débats s'appuient sur l'impo-sante littérature consacrée aux liens entre protection de l'emploi et performance du marché du travail développée au cours des dix dernières années. Toutefois, une source de divergence importante entre les marchés du travail européens, le degré de centralisation des négociations salariales, a été curieusement éludée dans la plupart de ces études. L'objet de cet article est précisément d'envisager d'un point de vue théorique la nature des interactions entre politiques du marché du travail et niveaux de négociation. Dans cette perspective, nous développons un modèle dynamique du marché du travail dans la lignée des travaux de Pissarides (2000) intégrant différentes branches d'activité. Notre analyse montre que dans ce cadre de référence, les négociations de branche conduisent systématiquement à une allocation inefficace des ressources. Il existe alors une justification explicite à l'introduction des politiques de l'emploi. Nous montrons alors qu'un ensemble de politiques, notamment fiscales et de protection de l'emploi, est susceptible d'assurer l'équivalence entre équilibre de branches et optimum.

The objective of this article is to evaluate quantitative implications of the hypothesis of matching, with endogenous participation, in the framework of a real cycle model. The choice of participation results from a trade off between domestic production and search for a job. Thus, fluctuations of the unemployment summarise the flows in and out of the labour force. Moreover, in this model, unemployment fluctuations are not Pareto optimal as in Andolfatto [1966] and Merz [1995]. Results of the simulations show how it is possible to explain some stylised facts of the American labour market when flows on this market are so clarified.