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on Contract Theory and Applications |
| By: | Kabátek, Jan (University of Melbourne); Liang, Ying (Monash University); Zheng, Kun (Shandong University) |
| Abstract: | Temporary employment contracts are often regarded as 'stepping stones' for workers' careers, because they can help inexperienced workers secure a permanent contract. Our study evaluates whether this stepping-stone function is moderated by the contract duration, exploiting a Dutch policy reform that shortened the maximum duration of sequences of temporary contracts with the same employers from 3 years to 2 years. Leveraging a sharp regression discontinuity design and administrative register data, we show that the reform accelerated the transitions of temporary workers to permanent contracts with the same employers, with the effect being strongest among those working for the same employers for 1-2 years. We conclude that the reform brought more job security to temporary workers without impeding the stepping-stone function of their contracts. |
| Keywords: | temporary contracts, permanent contract, stepping stone, chain rule |
| JEL: | J28 J41 J42 |
| Date: | 2022–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15407&r= |
| By: | Anujit Chakraborty; Guidon Fenig (Department of Economics, University of California Davis) |
| Abstract: | What kind of incentives optimize a worker's motivation and performance, especially in remote work settings? We recruit online workers to work for up to 45 minutes on tedious tasks over three days. We randomly assign them to individualistic (Solo) or one of two team incentives. Under our Cooperative team incentive, workers equally share the team's earnings. Under our Competitive team incentive, the best performer gets an additional bonus proportional to the team's total productivity. We find that workers under the Cooperative team incentives are most likely to participate on all three days, exhaust all 45 minutes of work, and complete more tasks. Workers under Competitive team incentives also outperform the Solo workers, but the effect is insignificant. When workers can additionally observe their team member's effort from previous days (observability condition), they increase their own effort in response to their partner's high effort. This escalation effect is strongest under Competitive incentives, and under the observability condition, both team incentives outperform the individualistic incentive. |
| JEL: | C9 C72 C92 D9 |
| Date: | 2022–08–15 |
| URL: | http://d.repec.org/n?u=RePEc:cda:wpaper:350&r= |
| By: | Paolo Guasoni; Yu-Jui Huang |
| Abstract: | Federal student loans are fixed-rate debt contracts with three main special features: (i) borrowers can use income-driven schemes to make payments proportional to their income above subsistence, (ii) after several years of good standing, the remaining balance is forgiven but taxed as ordinary income, and (iii) accrued interest is simple, i.e., not capitalized. For a very small loan, the cost-minimizing repayment strategy dictates maximum payments until full repayment, forgoing both income-driven schemes and forgiveness. For a very large loan, the minimal payments allowed by income-driven schemes are optimal. For intermediate balances, the optimal repayment strategy may entail an initial period of minimum payments to exploit the non-capitalization of accrued interest, but when the principal is being reimbursed maximal payments always precede minimum payments. Income-driven schemes and simple accrued interest mostly benefit borrowers with very large balances. |
| Date: | 2022–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2207.03438&r= |
| By: | Alexandra Fotiou; Alica Ida Bonk; Georgios Manalis |
| Abstract: | The recent European sovereign debt crisis highlighted the critical role of regional lending arrangements. For the first time, European mechanisms were called to design financing programmes for member countries in trouble. This paper analyses how the risk of contagion, an essential characteristic of interlinked economies, shapes borrowing conditions. We focus on the role of spillovers as a channel of bargaining power that a country might have when asking for financial support from regional lending institutions. We build and present a new database that records both the dates on which official meetings took place, relevant statements were released and the timing of the announcements regarding loan disbursements. This database allows us to assess the defining role that announcements of future actions have in mitigating spillover costs. In addition, we study the design of lending arrangements within a recursive contract between a lender and a sovereign country. When accounting for spillover costs, arising from the borrower to the creditor, we find that it is in the lender's best interest to back-load consumption by giving more weight to future transfers in order to reduce contagion cost. Subsequently, we test and validate our theoretical predictions by assessing the effect of spillovers on loan disbursements to programme-countries and by juxtaposing lending conditions imposed by the IMF and the European mechanisms. |
| Keywords: | Regional lending mechanisms; currency-union; spillovers |
| Date: | 2022–07–08 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2022/133&r= |