Fairness and the employment contract: North American regions versus Germany

Abstract

Substantial evidence shows that North Americans are generally more accepting of the market than Europeans and attribute market outcomes to a larger degree to effort or skill. Thus, North Americans might be more accepting of layoffs and pay cuts than Germans, and Germans might be more sensitive to the procedures and conditions under which pay cuts and layoffs occur. The empirical results from our quasi-experiment are largely in line with these hypotheses. The results may help to explain and be explained by the different labour market institutions in the different regions.

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