Advanced Search
MyIDEAS: Login to save this article or follow this journal

Flexibility at the Margin and Labor Market Volatility in OECD Countries

Contents:

Author Info

  • Hector Sala
  • José I. Silva
  • Manuel Toledo

Abstract

We study whether segmented labor markets with flexibility at the margin (e.g., just affecting fixed-term employees) can achieve similar volatility than fully deregulated labor markets. Flexibility at the margin produces a gap in separation costs among matched workers that cause fixed-term employment to be the main workforce adjustment device, which in turn increases de labor market volatility. This increased volatility is partially reverted when limitations in the duration and number of renewals of fixed-term contracts are introduced. Under this scenario, firms respond by reducing the intensity of job destruction since it becomes more difficult to avoid firing costs in permanents contracts. We present a matching model with temporary and permanent jobs where (i) the gap in firing costs and (ii) restrictions in the use of fixed-term contracts helps explain the similar volatility observed in many regulated OECD labor markets with flexibility at the margin vis-à-vis the fully deregulated ones.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://hdl.handle.net/10.1111/j.1467-9442.2012.01715.x
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 114 (2012)
Issue (Month): 3 (09)
Pages: 991-1017

as in new window
Handle: RePEc:bla:scandj:v:114:y:2012:i:3:p:991-1017

Contact details of provider:
Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442

Order Information:
Web: http://www.blackwellpublishing.com/subs.asp?ref=0347-0520

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Dale Mortensen & Eva Nagypal, 2007. "More on Unemployment and Vacancy Fluctuations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(3), pages 327-347, July.
  2. Victor Aguirregabiria & Cesar Alonso-Borrego, 2009. "Labor contracts and flexibility : evidence from a labor market reform in Spain," Economics Working Papers we091811, Universidad Carlos III, Departamento de Economía.
  3. E Wasmer, 1997. "Competition for Jobs in a Growing Economy and the Emergence of Dualism," CEP Discussion Papers dp0369, Centre for Economic Performance, LSE.
  4. Manuel Toledo & Jose I. Silva, 2005. "Labor Turnover Costs and the Cyclical Behavior of Vacancies and Unemployment," 2005 Meeting Papers 775, Society for Economic Dynamics.
  5. Burgess, Simon & Turon, Hélène, 2010. "Worker flows, job flows and unemployment in a matching model," European Economic Review, Elsevier, vol. 54(3), pages 393-408, April.
  6. Bruce D. Meyer, 1988. "Unemployment Insurance And Unemployment Spells," NBER Working Papers 2546, National Bureau of Economic Research, Inc.
  7. Pietro Garibaldi & Giovanni L. Violante, 2005. "The Employment Effects of Severance Payments with Wage Rigidities," Economic Journal, Royal Economic Society, vol. 115(506), pages 799-832, October.
  8. Héctor Sala & José I. Silva, 2009. "Flexibility at the margin and labour market volatility: The case of Spain," Investigaciones Economicas, Fundación SEPI, vol. 33(2), pages 145-178, May.
  9. Tito Boeri & Pietro Garibaldi, 2007. "Two Tier Reforms of Employment Protection: A Honeymoon Effect?," Carlo Alberto Notebooks 37, Collegio Carlo Alberto.
  10. Osuna Victoria, 2005. "The Effects of Reducing Firing Costs in Spain: A Lost Opportunity?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-29, May.
  11. William Kerr & Adriana Kugler & David Autor, 2007. "Do Employment Protections Reduce Productivity? Evidence from U.S. States," Working Papers 07-04, Center for Economic Studies, U.S. Census Bureau.
  12. James S. Costain & Michael Reiter, 2003. "Business cycles, unemployment insurance and the calibration of matching models," Economics Working Papers 872, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2006.
  13. Bentolila, Samuel & Cahuc, Pierre & Dolado, Juan J. & Le Barbanchon, Thomas, 2010. "Two-Tier Labor Markets in the Great Recession: France vs. Spain," CEPR Discussion Papers 8152, C.E.P.R. Discussion Papers.
  14. Garibaldi, Pietro, 1998. "Job flow dynamics and firing restrictions," European Economic Review, Elsevier, vol. 42(2), pages 245-275, February.
  15. Carl E. Walsh, 2005. "Labor Market Search, Sticky Prices, and Interest Rate Policies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(4), pages 829-849, October.
  16. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  17. Michael Elsby & Bart Hobijn & Aysegül Sahin, 2009. "Unemployment dynamics in the OECD," Working Paper Series 2009-04, Federal Reserve Bank of San Francisco.
  18. Assar Lindbeck & Dennis J. Snower, 1989. "The Insider-Outsider Theory of Employment and Unemployment," MIT Press Books, The MIT Press, edition 1, volume 1, number 026262074x, December.
  19. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  20. Jan Babecky & Philip Du Caju & Theodora Kosma & Martina Lawless & Julian Messina & Tairi Rõõm, 2009. "Downward nominal and real wage rigidity :survey evidence from European firms," Bank of Estonia Working Papers 2009-3, Bank of Estonia, revised 06 Dec 2009.
  21. Abowd, John M. & Kramarz, Francis, 2003. "The costs of hiring and separations," Labour Economics, Elsevier, vol. 10(5), pages 499-530, October.
  22. Francesco Zanetti, 2007. "Labour market institutions and aggregate fluctuations in a search and matching model," Bank of England working papers 333, Bank of England.
  23. Barbara Petrongolo & Christopher Pissarides, 2000. "Looking into the black box: a survey of the matching function," LSE Research Online Documents on Economics 2122, London School of Economics and Political Science, LSE Library.
  24. Juan J Dolado & Carlos Garcia--Serrano & Juan F. Jimeno, 2002. "Drawing Lessons From The Boom Of Temporary Jobs In Spain," Economic Journal, Royal Economic Society, vol. 112(721), pages F270-F295, June.
  25. Adriana Kugler & Juan F. Jimeno & Virginia Hernanz, . "Employment Consequences of Restrictive Permanent Contracts: Evidence from Spanish Labor Market Reforms," Working Papers 2003-14, FEDEA.
  26. Marcelo Veracierto, 2003. "Firing costs and business cycle fluctuations," Working Paper Series WP-03-29, Federal Reserve Bank of Chicago.
  27. James H. Stock & Mark W. Watson, 2003. "Understanding Changes in International Business Cycle Dynamics," NBER Working Papers 9859, National Bureau of Economic Research, Inc.
  28. Cabrales, Antonio & Hopenhayn, Hugo A., 1997. "Labor-market flexibility and aggregate employment volatility," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 46(1), pages 189-228, June.
  29. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier.
  30. Marcus Hagedorn & Iourii Manovskii, 2007. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," IEW - Working Papers 351, Institute for Empirical Research in Economics - University of Zurich.
  31. Garey Ramey & Wouter J. den Haan & Joel Watson, 2000. "Job Destruction and Propagation of Shocks," American Economic Review, American Economic Association, vol. 90(3), pages 482-498, June.
  32. Azariadis, Costas & Pissarides, Christopher A., 2007. "Unemployment dynamics with international capital mobility," European Economic Review, Elsevier, vol. 51(1), pages 27-48, January.
  33. Cahuc, Pierre & Postel-Vinay, Fabien, 2001. "Temporary Jobs, Employment Protection and Labor Market Performance," IZA Discussion Papers 260, Institute for the Study of Labor (IZA).
  34. Antonella Trigari, 2009. "Equilibrium Unemployment, Job Flows, and Inflation Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(1), pages 1-33, 02.
  35. James Costain & Juan F. Jimeno & Carlos Thomas, 2010. "Employment fluctuations in a dual labor market," Banco de Espa�a Working Papers 1013, Banco de Espa�a.
  36. Cecilia Albert & Carlos García-Serrano & Virginia Hernanz, 2004. "Firm-provided training and temporary contracts," Spanish Economic Review, Springer, vol. 7(1), pages 67-88, January.
  37. David H. Autor & William R. Kerr & Adriana D. Kugler, 2007. "Does Employment Protection Reduce Productivity? Evidence From US States," Economic Journal, Royal Economic Society, vol. 117(521), pages 189-217, 06.
  38. Messina, Julián & Vallanti, Giovanna, 2006. "Job Flow Dynamics and Firing Restrictions: Evidence from Europe," IZA Discussion Papers 2045, Institute for the Study of Labor (IZA).
  39. O Blanchard & A Landier, 2002. "The Perverse Effects of Partial Labour Market Reform: fixed--Term Contracts in France," Economic Journal, Royal Economic Society, vol. 112(480), pages F214-F244, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Charlot, Olivier & Malherbet, Franck, 2010. "Education and the Welfare Gains from Employment Protection," IZA Discussion Papers 4799, Institute for the Study of Labor (IZA).
  2. Sala, Hector & Trivín, Pedro, 2013. "Labour Market Dynamics in Spanish Regions: Evaluating Asymmetries in Troublesome Times," IZA Discussion Papers 7746, Institute for the Study of Labor (IZA).
  3. Silva, José I. & Vázquez-Grenno, Javier, 2013. "The ins and outs of unemployment in a two-tier labor market," Labour Economics, Elsevier, vol. 24(C), pages 161-169.
  4. Dario JUDZIK & Hector SALA, 2013. "Productivity, deunionization and trade: Wage effects and labour share implications," International Labour Review, International Labour Organization, vol. 152(2), pages 205-236, 06.
  5. Caterina Giannetti & Marianna Madia & Luigi Moretti, 2014. "Job insecurity and financial distress," Applied Financial Economics, Taylor & Francis Journals, vol. 24(4), pages 219-233, February.
  6. Bentolila, Samuel & Cahuc, Pierre & Dolado, Juan J. & Le Barbanchon, Thomas, 2010. "Two-Tier Labor Markets in the Great Recession: France vs. Spain," IZA Discussion Papers 5340, Institute for the Study of Labor (IZA).
  7. Charlot, Olivier & Malherbet, Franck, 2013. "Education and employment protection," Labour Economics, Elsevier, vol. 20(C), pages 3-23.
  8. Pedro Gete and Paolo Porchia, 2011. "A Real Options Analysis of Dual Labor Markets and the Single Labor Contract," Working Papers gueconwpa~11-11-02, Georgetown University, Department of Economics.
  9. Cahuc, Pierre & Charlot, Olivier & Malherbet, Franck, 2012. "Explaining the Spread of Temporary Jobs and its Impact on Labor Turnover," CEPR Discussion Papers 8864, C.E.P.R. Discussion Papers.
  10. Héctor Sala & José I. Silva, 2009. "Flexibility at the margin and labour market volatility: The case of Spain," Investigaciones Economicas, Fundación SEPI, vol. 33(2), pages 145-178, May.
  11. Carlos Gradín & Olga Cantó & Coral del Río, 2012. "Unemployment and Spell Duration during the Great Recession in the EU," Working Papers 1205, Universidade de Vigo, Departamento de Economía Aplicada.
  12. Gete, Pedro & Porchia, Paolo, 2011. "A real options analysis of dual labor markets and the single labor contract," MPRA Paper 34055, University Library of Munich, Germany.
  13. Ekkehard Ernst & Uma Rani, 2011. "Understanding unemployment flows," Oxford Review of Economic Policy, Oxford University Press, vol. 27(2), pages 268-294.
  14. Silva, José I. & Toledo, Manuel, 2008. "Separation costs, job heterogeneity and labor market volatility in the matching model," Economics Letters, Elsevier, vol. 101(1), pages 77-79, October.
  15. Samuel Bentolila & Pierre Cahuc & Juan José Dolado & Thomas Le Barbanchon, ., 2010. "Unemployment and Temporary Jobs in the Crisis: Comparing France and Spain," Working Papers 2010-07, FEDEA.
  16. Bosio, Giulio, 2008. "Labour market transition in Italy: an empirical investigation," MPRA Paper 18901, University Library of Munich, Germany.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bla:scandj:v:114:y:2012:i:3:p:991-1017. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.