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We derive the optimal labor contract for a levered firm in an economy with perfectly competitive capital and labor markets. Employees become entrenched under this contract and so face large human costs of bankruptcy. The firm's optimal capital structure therefore depends on the trade-off between these human costs and the tax benefits of debt. Optimal debt levels consistent with those observed in practice emerge without relying on frictions such as moral hazard or asymmetric information. Consistent with empirical evidence, persistent idiosyncratic differences in leverage across firms also result. In addition, wages should have explanatory power for firm leverage.

Globalisation, the shift from manufacturing to services as a source of employment, and the spread of information-based systems and technologies have given birth to a new economy, which emphasises flexibility in the labour market and in employment relations. These changes have led to the erosion of the standard (industrial) employment relationship and an increase in precarious work - work which is poorly paid and insecure. Women perform a disproportionate amount of precarious work. This collection of original essays by leading scholars on labour law and women's work explores the relationship between precarious work and gender, and evaluates the extent to which the growth and spread of precarious work challenges traditional norms of labour law and conventional forms of legal regulation.The book provides a comparative perspective by furnishing case studies from Australia, Canada, the Netherlands, Quebec, Sweden, the UK, and the US, as well as the international and supranational context through essays that focus on the IMF, the ILO, and the EU. Common themes and concepts thread throughout the essays, which grapple with the legal and public policy challenges posed by women's precarious work.

Although there has been substantial literature on the economic impact of labour legislation in the world, the number of studies related to Vietnam is, surprisingly, very small. Our article provides the first evidence on the link between labour law and various labour market outcomes using the Vietnamese context. We examine how labour supply, earnings and social protection outcomes adjusted to labour contract reform under the 2012 Labour Code. The study uses three waves of the Vietnam Labour Force Survey to examine both medium-term and short-term impacts of the reform. Difference-in-differences and fixed-effect techniques are utilised. Overall, we find that the law change significantly affected hours worked, work absenteeism, monthly allowance and incidence of bonuses among contracted workers. However, the effects on workers' monthly wages, overtime remuneration and other allowances, and the social protection-related outcomes were not clear in the short run.

Based on a survey of 1,268 firms in 12 cities, this article empirically studies unions’ effects on worker welfare in China. Regressions carried out on a rich set of specifications show that unionization is significantly associated with higher hourly wages and larger pension coverage and weakly associated with lower monthly working hours. Further econometric analysis finds that unions promote individual and collective contracts. The effect of collective contracts vanishes when unions are present, whereas individual contracts have independent and positive effects. In addition, unions have effects on workers’ welfare independent of collective and individual contracts.

This paper investigates the causal effect of employment protection on inventor mobility. Taking the enactment of China’s Labor Contract Law in 2008 as a quasi-natural experiment, our difference-in-difference estimate utilizes two-dimensional variations: firm ownership (i.e., SOEs vs. non-SOEs) and year (i.e., before and after 2008). Using combined data on patent applications filed at the State Intellectual Property Office of China and listed manufacturing companies over 2004–2012, we find that the law plays a sizeable positive role in reducing the likelihood of inventor mobility. This effect is more pronounced for firms with higher labor intensity, stricter law enforcement, higher innovation dependence, lower R&D team stability, and inventors that work outside the core of R&D networks. Further, we provide consistent evidence for two plausible mechanisms for the positive effect: limiting the ability of employers to unfairly dismiss inventors and substituting low-skilled workers with inventors. In addition, the law causes firms to obtain more high-quality patents and reduces bankruptcy risk. Overall, our findings shed new light on the economic effects of labor protection in a typical emerging market.

This paper provides the first experimental test of Edward Lazear's (1979) model of deferred compensation. We examine the relationship between firms' wage offers and workers' effort supply in a multiperiod environment. If firms can ex ante commit to a wage schedule with deferred compensation, workers should respond by supplying sufficient effort to avoid dismissal. We contrast this full-commitment case to controls with no commitment and computer-generated wages in order to examine the roles of monetary incentives, social preferences, and reciprocity. Finally, we examine a setup without formal commitment, but where firms can build a reputation for paying deferred wages.

We analyze a large, anonymous labour market in which firms motivate their workers via relational contracts. The market is frictionless and features on-the-job search, in that all acceptable vacancies are immediately filled and the employed compete with the unemployed for vacancies. While firms and workers are ex ante identical, the unique equilibrium exhibits a continuous distribution of contracts in which high wage firms have higher retention rates, more motivated workers and higher productivity. The model thus generates dispersion in wages, productivity and human resource strategies, and gives rise to endogenous job ladders. An exogenous increase in on-the-job search increases the quantity of jobs but decreases their quality; with sufficient on-the-job search there is full employment, and wage dispersion rather than unemployment motivates workers.

One explanation advanced for the persistent gender pay differences in labor markets is that women avoid salary negotiations. By using a natural field experiment that randomizes nearly 2,500 job seekers into jobs that vary important details of the labor contract, we are able to observe both the extent of salary negotiations and the nature of sorting. We find that when there is no explicit statement that wages are negotiable, men are more likely to negotiate for a higher wage, whereas women are more likely to signal their willingness to work for a lower wage. However, when we explicitly mention the possibility that wages are negotiable, these differences disappear completely. In terms of sorting, we find that men, in contrast to women, prefer job environments where the “rules of wage determination” are ambiguous. This leads to the gender gap being much more pronounced in jobs that leave negotiation of wage ambiguous. This paper was accepted by Gérard P. Cachon, behavioral economics.

This study attempts to show the influencing factors that affect the residence intention of the ethnic minority floating population, explores the ways to promote their citizenization, improves the \"quality\" of the new type of urbanization, and achieves communication and integration of all ethnic groups in the city. Results show that the male’s intention is higher than that of the female, a stable marriage relationship is beneficial to the intention to stay in the city, and the Hukou system still exerts a significant influence on the residential intention of the population. Signing a labor contract has a positive impact on the intention to stay in the city, which is stronger among the minority floating population in the province than that of inter-provincial migration population. Social interaction and psychological adaptation further strengthen the intention of the minority floating population to stay in the city. Therefore, in promoting the urbanization of minority floating population, efforts are needed to deepen the household registration system, improve the level of social security and pay more attention to social interaction and psychological adaptation, so as to forge a strong sense of community among the Chinese people.

This study examines how a labor cost shock affects firms’ research and development (R&D) activity, focusing on the heterogeneous effect across firm size. Using the difference-in-differences approach, we investigate the R&D effect of Labor Contract Law (LCL) on firms in China. Empirical evidence reveals that, when considering the law binding issue, strict enforcement of the LCL has a negative treatment effect on treated firms’ R&D expenditure, which was reduced by 3.03%–6.75% on average, but it did not affect their likelihood of engaging in R&D. Crucially, the LCL’s R&D effect varies greatly by firm size. There is a positive treatment effect for large and medium-sized firms, whereas small treated firms reduce R&D in response to the labor cost shock. These heterogeneous effects apply to R&D propensity across firm size. The potential mechanisms for mitigating the LCL’s cost impact are discussed. Robustness checks reaffirm the above findings.Plain English SummaryThe purpose of this paper is to question that does a stringent labor regulation hamper or facilitate firms’ R&D activity in China? Whether this R&D effect of labor regulation differs across large, medium, and small firms. We examine these questions by drawing on the discussions about labor regulation, firm size, and R&D in literature. Subsequently, the difference-in-differences approach is adopted to conduct empirical estimations, with a panel dataset drawn from Chinese Annual Survey of Industrial Firms. We find that strict enforcement of the Labor Contract Law executes a negative treatment effect on treated firms’ R&D expenditure, but not for their likelihood of engaging in R&D. Crucially, this R&D effect is a positive for large and medium-sized enterprises, but negative for small firms. Thus, the principal implication of this study is that small firms are disadvantageous in innovation activity under labor cost shocks. Small firms should consider feasible strategies to promote productivity in response to changes in the external environment.