Escaping social pressure: Fixed-term contracts in multi-establishment firms

Andrea Bassanini (1, 2) , Eve Caroli (2, 3, 4, 5) , François Fontaine (6, 5) , Antoine Rebérioux (2, 7)

1 ERMES - Equipe de recherche sur les marches, l'emploi et la simulation
2 EconomiX - EconomiX
3 Legos - Laboratoire d'Economie et de Gestion des Organisations de Santé
4 LEDa - Laboratoire d'Economie de Dauphine
5 PJSE - Paris Jourdan Sciences Economiques
6 CREST-INSEE - Centre de Recherche en Economie et en Statistique
7 LADYSS - Laboratoire Dynamiques Sociales et Recomposition des Espaces

We develop a simple theoretical model showing that, by adding to the adjustment costs associated with permanent contracts, local social pressure against dismissals creates an incentive for CEOs to rely on fixed-term contracts, in an attempt to escape social pressure. Using linked employer-employee data, we show that establishments located closer to headquarters have higher shares of fixed-term contracts in hiring than those located further away whenever firms' headquarters are located in self-centered communities and the CEO not only works but also lives there. We show that these findings can only be explained by local social pressure.

Mots clés: Social pressure; Employment contracts; Adjustment costs; CEO reputation

Domaines: Économie et finance quantitative [q-fin]

Andrea Bassanini, Eve Caroli, François Fontaine, Antoine Rebérioux. Escaping social pressure: Fixed-term contracts in multi-establishment firms. Journal of Economic Behavior and Organization, 2021, 188, pp.697-715. ⟨10.1016/j.jebo.2021.05.027⟩. ⟨hal-03353701⟩