This article provides an overview of empirical and theoretical research on dual labor markets. It revisits the labor-market effects of dual employment protection legislation as well as the main factors behind its resilience. Characterized by a high incidence of temporary contracts, which may lead to stepping-stone or dead-end jobs, dual labor markets exhibit specific features regarding the determination of employment, unemployment, churn, training, productivity growth, wages, and labor market flows. Relying on the contrasting experiences of several OECD countries with different degrees of duality and, in particular, on the very poor employment performance of some EU countries during the Great Recession, lessons are drawn about policy-reform strategies aiming to correct the inefficiencies of dual labor markets.
Samuel Bentolila, Juan J. Dolado, and Juan F. Jimeno
Helen Hayes and Matt Sutton
Contracts and working conditions are important influences on the medical workforce that must be carefully constructed and considered by policymakers. Contracts involve an enforceable agreement of the rights and responsibilities of both employer and employee. The principal–agent relationship and presence of asymmetric information in healthcare means that contracts must be incentive compatible and create sufficient incentive for doctors to act in the payer’s best interests. Within medicine, there are special characteristics that are believed to be particularly pertinent to doctors, who act as agents to both the patient and the payer. These include intrinsic motivation, professionalism, altruism, and multitasking, and they influence the success of these contracts. The three most popular methods of payment are fee-for-service, capitation, and salaries. In most contexts a blend of each of these three payment methods is used; however, guidance on the most appropriate blend is unclear and the evidence on the special nature of doctors is insubstantial. The role of skill mix and teamwork in a healthcare setting is an important consideration as it impacts the success of incentives and payment systems and the efficiency of workers. Additionally, with increasing demand for healthcare, changing skill mix is one response to problems with recruitment and retention in health services. Health systems in many settings depend on a large proportion of foreign-born workers and so migration is a key consideration in retention and recruitment of health workers. Finally, forms of external regulation such as accreditation, inspection, and revalidation are widely used in healthcare systems; however, robust evidence of their effectiveness is lacking.
Economists have long regarded healthcare as a unique and challenging area of economic activity on account of the specialized knowledge of healthcare professionals (HCPs) and the relatively weak market mechanisms that operate. This places a consideration of how motivation and incentives might influence performance at the center of research. As in other domains economists have tended to focus on financial mechanisms and when considering HCPs have therefore examined how existing payment systems and potential alternatives might impact on behavior. There has long been a concern that simple arrangements such as fee-for-service, capitation, and salary payments might induce poor performance, and that has led to extensive investigation, both theoretical and empirical, on the linkage between payment and performance. An extensive and rapidly expanded field in economics, contract theory and mechanism design, had been applied to study these issues. The theory has highlighted both the potential benefits and the risks of incentive schemes to deal with the information asymmetries that abound in healthcare. There has been some expansion of such schemes in practice but these are often limited in application and the evidence for their effectiveness is mixed. Understanding why there is this relatively large gap between concept and application gives a guide to where future research can most productively be focused.