Spezifisches Humankapital, implizite Verträge und ausländische Arbeitskräfte

This paper investigates, in a contractual framework, the impact of foreign workers, with short term residence permits, on the Swiss labor market. Investments in firm-specific human capital are less rewarding because of the foreign worker's limited or uncertain stay. Therefore, fewer self-enforcing implicit contracts are concluded between employees and employers. The fewer such contracts are made in the labor market the more wages and employment will fluctuate with the demand for goods. These implications are tested and confirmed in an industry model with 15 Swiss manufacturing and services industries. A foreign work force policy based on limited and uncertain residence permits leads to a more volatile labor market.