Journal of Economics

, Volume 98, Issue 1, pp 77–88

The French first employment contract: efficient screening device or Kleenex contract?

Article

DOI: 10.1007/s00712-009-0080-0

Cite this article as:
Bac, M. & Genc, S. J Econ (2009) 98: 77. doi:10.1007/s00712-009-0080-0

Abstract

The controversial novelty in the French Labor Law reform, withdrawn in April 2006, was a contract form under which employers could dismiss young workers on probation without justification. Proponents argued that the reform would improve screening and boost employment whereas opponents dubbed it the “Kleenex contract.” We show that the new contract can produce an incentive to dismiss even suitable workers but that this harmful effect could be mitigated by instituting public ratings of firms according to their propensity to dismiss young workers. Informed workers could then respond to job offers according to firms’ layoff records, which in turn would restore promotion incentives and efficient screening.

Keywords

French labor law reformContractsEfficient screening

JEL Classification

J38J41

Copyright information

© Springer-Verlag 2009

Authors and Affiliations

  1. 1.Faculty of Arts and Social SciencesSabanci UniversityIstanbulTurkey
  2. 2.Department of EconomicsUniversity of PittsburghPittsburghUSA