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Theory of Tenure

Berkeley Electronic Press


This paper addresses permanent labor contracts or tenure from an economic perspective. Surprisingly enough, the question of tenure has rarely been treated by economists, with the exception of tenure tracks in universities. Most existing literature comes from political scientists, public administration and legal scholars, of course the most recent book being by a lawyer: Barbara Weichselbaumer, Berufsbeamtentum und Verfassung (professional civil servants and the constitution, Vienna 2003) Looking at the peculiar properties of the kind of contract underlying tenure, it is first investigated, if it can be supported by arguments rooted in public interest. Three types of civil servants are distinguished, for which a public interest may exist: Bureaucrats providing advice in public policy making, those concerned with law enforcement and those dealing with public services, which share the characteristics of option goods. Subsequently, the role of unions is addressed, thus turning to a private interest perspective. Finally, an attempt is made to scrutinize the reliability of tenure by introducing the concept of a curriculum profile, a kind of stylized cost-benefit-analysis of long-term contracts. Net-performance schedules are studied and some conjectures concerning tenure and the alternatives are offered.

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