Zero-hours Contracts in a Frictional Labour Market

Abstract We develop an equilibrium search model of the coexistence of regular and flexible work arrangements, calibrated to evaluate the U.K.’s zero-hours contract (ZHC). Our findings reveal mixed equilibrium and welfare effects. ZHCs stimulate job creation among firms facing highly volatile business conditions, increasing total employment but potentially reducing regular jobs. Simultaneously, ZHCs boost labour force participation by attracting individuals who prefer flexible work schedules, whi