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The Study on China Labor Dispatch System Based on the Principal-Agent Theory

Author: LiuChang
Tutor: JiangZuoZuo
School: Dongbei University of Finance
Course: Labor Economics
Keywords: labor dispatch principal-agent theory motivation
CLC: F249.21
Type: Master's thesis
Year: 2013
Downloads: 3
Quote: 0
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Abstract


As a flexible employment, labor dispatch was introduced to China in1980s and enjoys high popularity among employers especially in recent years with the economics rapid development. Owe to its unique characters, labor dispatch not only benefits the labor costs and employment risk for employers, but also successes in creating jobs for the job market. However, when labor dispatch in China is implemented, its immaturity also brings various defects such as "same position with different salary", permanent employers transferring to temporary type, layoff without regulations and so on. Therefore, it arouses attention to regulate the labor dispatch employment and protect the right of the labor dispatch employees. With reference to the regulation of labor dispatch, most study focuses on the law and management while from the perspective of economics, the principal-agent model could provides specific principal-agent model to explain the employment relationship and motivation methods in labor dispatch. Based on it, the paper will try to utilize the principal-agent model to study the asymmetric information among three parties in labor dispatch and give suggestion in the system improvement.Though the China labor contract law has defined clearly that labor dispatch could only be implemented when the vocation is temporary, subsidiary and alternative, it is common to find employees hired by labor dispatch beyond the limits above. It initiates the new perspective of this paper. The paper will discuss the principal-agent relationships in the labor dispatch in two situations:the one between the employers and temporary, subsidiary and alternative employees and the one between the employers and employees hired by labor dispatch illegally. Besides, when the employers choose transferring labor dispatched employees to permanent type as motivation, it appears a new task to design appropriate salary before and after the transfer. Concerning it, the primary study of salary design mentioned above will also be an important part of the paper. The main conclusions could be drew as below:1) Under the situation of information asymmetry, the employers have to spend more to motivate the temporary, subsidiary and alternative employees to contributes their efforts;2) Under the situation of information asymmetry, to differentiate the employees hired by labor dispatch illegally, the employers could design different types of salary-output and notify that the ones who choose high salary-output may get the chance to be transferred to permanent type when the employees on board.Based on the analysis above, the paper holds the point that the labor dispatch in China could be improved in three aspects below:1) The employers should strengthen the motivation for labor dispatched employees such as improving the performance assess and transferring the system of the labor dispatched employees and emphasis on the nonmaterial motivation strategy.2) The reputation should serve effectively in the adverse selection. The excellent labor dispatched employees can get the reference letter and the rates can be introduced to the labor dispatched agency competition;3) The law is supposed to clarify the responsibility of the employers and labor dispatched agency. Meanwhile, with reference to the "same position with different salary" which arouses attention recently, the paper suggests that the practice of it still needs discretion. Without considering the reality, the practice could only be the castle in the air and so it does in the case of ICBC and CBC employees strike.Besides, due to the academic study limit of the author, there exit lots of defects to be improved. First, the models are not completed. The paper only provides the principal-agent models to explain the relationship between employers and labor dispatched employees and other relationships in the labor dispatch do not involve. In addition, the model design is based on the single principal and the effort level is only classified to hard work and lazy work. The multiple principals and effort levels do not be introduced. Second, the paper does not introduce the explanation from the GHM model. The principal-agent theory regulates the duty and right of different parties before the relationship forms and therefore it is regarded as complete contracting theory for it focuses the supervision after the relationship forms. In contrast, the GHM suggests that the duty and right could be regulated after the relationship forms and it emphasizes on the design of the system. With the development of the theory, the main study of the contracting theory has been transferring to GHM model in theses years. In conclusion, detailed analysis on it is convinced to start with the further study.

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CLC: > Economic > Economic planning and management > Labor Economics > Countries in the world of labor economic profile > China > Labor force
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