Journal of Economics

, Volume 98, Issue 1, pp 77-88

First online:

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

  • Mehmet BacAffiliated withFaculty of Arts and Social Sciences, Sabanci University Email author 
  • , Serife GencAffiliated withDepartment of Economics, University of Pittsburgh

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The controversial novelty in the French Labor Law reform, withdrawn in April 2006, was a contract form under which employers could dismiss young workers on probation without justification.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.


French labor law reform Contracts Efficient screening

JEL Classification

J38 J41