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Introducing a temporary help agency in a labor market : a multi-agent model

Abstract : Extended abstract Temporary Help Agencies (THA) bring into the labor market a new fundamental feature. They are intermediaries on a market which is modeled as decentralized by the dominant theoretical framework, search theory. This theory explains the flows of hires by the individual search by workers and employers and ensuing matches. THA bring some centralization in this framework. If agents are moved by self interest, some should create such agencies, since they lower search costs through the benefits of specialization, and can earn profits. Introducing intermediaries is then a necessity to give the search model more coherent microfoundations. THA are not the only intermediaries in the real labor market. Many countries have a national placement agency paid by the tax payers. However THA do not only match, they are the legal employers of the workers, and the contract is therefore a particular contract, different from the standard Fixed Term Contracts (FTC). Then THA propose contracts which involve a mark up on wages, and which are competed by the standard FTC, implying search costs for the employing firm. The two types of contracts are substitutes and their coexistence is not obvious. Moreover temporary help jobs have important consequences for the labor market outcomes. THA select the workers for the client firm, and can gain precise information since they evaluate the same worker often for a new contract. Moreover it appears to be commun practice that they provide the worker with the training needed for the job in the client firm, since the short duration of the contract would make it too costly. A consequence is that temporary help workers, beyond being selected among condidates, gain human capital and also some experience on these jobs, three factors that may act as stepping stones for a future Open Ended Contract (OEC). However terminations rarely lead to an immediate OEC and short durations send most of the workers repeatedly into unemployment, delaying integration into OEC. Several major questions can then be tackled by the introduction of a THA in a model of the labor market. In this first paper on the topic, we will study three. First we will show that a calibrated model displays the coexistence of the two types of contracts, as well as the presence of OEC. Second we will study the efficiency that the temporary help contracts can bring to a labor market, notably in terms of unemployment and vacancies. Third we will analyse the consequences for the carreers of young workers. Are temporary help jobs a stepping stones or traps, and for whom ? In order to carry this analysis which is novel in the literature, we introduce a THA in WorkSim, a large Agent Based Model of the French labor market, with 10,000 agents, which involves a scale of 1/4700. It is calibrated by the CMA-ES algorithm which sets 63 parameters to fit optimally 67 aggregated variables (measured for the year 2014). Goudet, Kant & Ballot, (2016) give a description of the first version of the model. The current version (Ballot, Kant & Goudet 2015) adds the endogenization of the choice between Fixed Term Contracts (FTC) and OEC, based on the total expected costs of each type of contract and anticipations by the firms on their own demand. We then give to the FTC a role of buffer. The decisions of the agents are based on search theory, albeit in a bounded rational context. This is justified on cognitive ground but also by the complexity of a labor market marked by the heterogeneity of our agents. Search theory allows to distinguish inactive 1 UPMC Univ Paris 06, UMR 7606, LIP6
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https://hal.archives-ouvertes.fr/hal-01513271
Contributor : Jean-Daniel Kant <>
Submitted on : Thursday, April 27, 2017 - 1:08:49 PM
Last modification on : Thursday, March 21, 2019 - 2:22:24 PM
Long-term archiving on: : Friday, July 28, 2017 - 12:26:42 PM

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Olivier Goudet, Gérard Ballot, Jean-Daniel Kant. Introducing a temporary help agency in a labor market : a multi-agent model. 22nd annual Workshop on the Economic Science with Heterogeneous Interacting Agents (WEHIA 2017), Jun 2017, Milan, Italy. ⟨hal-01513271⟩

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