, Volume 98, Issue 1, pp 77-88
Date: 17 Jun 2009

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

Rent the article at a discount

Rent now

* Final gross prices may vary according to local VAT.

Get Access

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The controversial novelty in the French Labor Law reform, withdrawn in April 2006, was a contract form under which employers could dismiss young workers on probation without justification.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