This paper analyses possible effects on total employment, and the distribution between agency work and regular contracts as a consequence of the Swedish implementation of the EU Temporary and Agency Workers Directive in a dual labour market Mortensen-Pissarides search model. The directive states...

Paper [I] adds to the theoretical literature on the incentives of Temporary Work Agencies (TWAs). Using a principal-agent model with hidden action to model two main types of contracts between a TWA and a Client Firm (CF), the TWA is shown to potentially act against the best interest of the CF...