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Cambridge Journal of Economics Advance Access originally published online on December 13, 2007
Cambridge Journal of Economics 2008 32(3):421-439; doi:10.1093/cje/bem040
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© The Author 2007. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

Fairness and the employment contract: North American regions versus Germany

Knut Gerlach, David Levine, Gesine Stephan and Olaf Struck*

* University of Hannover, University of California at Berkeley, Institute for Employment Research, Nuremberg and University of Jena, respectively

Address for correspondence: Gesine Stephan, Institute for Employment Research, Regensburger Straße 104, 90478 Nürnberg, Germany; email: gesine.stephan{at}iab.de

Substantial evidence shows that North Americans are generally more accepting of the market than Europeans and attribute market outcomes to a larger degree to effort or skill. Thus, North Americans might be more accepting of layoffs and pay cuts than Germans, and Germans might be more sensitive to the procedures and conditions under which pay cuts and layoffs occur. The empirical results from our quasi-experiment are largely in line with these hypotheses. The results may help to explain and be explained by the different labour market institutions in the different regions.

Key Words: Fairness • Employment contract • Comparative labour markets

JEL classifications: M52, J63, J31, P52

Manuscript received January 15, 2007; final version received September 14, 2007.


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