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If the future market wage is uncertain, engaging in long-term employment is risky, with the risk depending on how regulated the labor market is. In the experiment long-term employment can result either from offering long-term contracts or from repeatedly and mutually opting for rematching. Treatments differ in how regulations restrict the employer's exibility in adapting the employment contract to changes of the market (wage). All treatments allow for longer contract duration as well as for mutually opting to be rematched. Effort is chosen by employees after a contract is concluded. Treatments vary from no exibility to any restriction at all.
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