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Measuring the Utility Cost of Temporary Employment Contracts Before Adaptation: A Conjoint Analysis Approach

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Abstract

This study attempts to estimate the ‘utility cost’ of temporary employment contracts purged of the psychological effects of adaptation. A conjoint analysis experiment is used that examines the ex ante contract preferences of a unique sample of low-skilled employees from seven European countries. It is shown that permanent contract holders request a significant wage premium to move to a temporary job. In contrast, temporary workers are indifferent between permanent and temporary contracts, ceteris paribus. The evidence suggests that individuals have a psychological immune system which neutralizes events that challenge their sense of wellbeing, such as job insecurity.

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