This paper provides a labour supply explanation to the observation that in Germany employment changes are asymmetric during the business cycle. Employment increases are slower, because the reservation wage of workers increases in times of job uncertainty. Workers are afraid in those periods of...

Using data from large-scale establishment surveys in Britain and France, we show that incentive pay for non-managers is more widespread in France than in Britain. We explain this finding in terms of the "beneficial constraint" arising from stronger employment protection in France, which provides...