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Threshold Effects of Dismissal Protection Regulation and the Emergence of Temporary Work Agencies

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Author Info
Yu-Fu Chen (University of Dundee)
Michael Funke (Hamburg University)

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Abstract

Labour market regulations aimed at enhancing job-security are dominant in several OECD countries. These regulations seek to reduce dismissals of workers and fluctuations in employment. The main theoretical contribution is to gauge the effects of such regulations on labour demand across establishment sizes. In order to achieve this, we investigate an optimising model of labour demand under uncertainty through the application of real option theory. We also consider other forms of employment which increase the flexibility of the labour market. In particular, we are modelling the contribution of temporary employment agencies (Zeitarbeit) allowing for quick personnel adjustments in client firms. The calibration results indicate that labour market rigidities may be crucial for understanding sluggishness in firms' labour demand and the emergence and growth of temporary work.

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File URL: http://www.bepress.com/cgi/viewcontent.cgi?article=1679&context=snde
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Publisher Info
Article provided by Berkeley Electronic Press in its journal Studies in Nonlinear Dynamics & Econometrics.

Volume (Year): 13 (2009)
Issue (Month): 4 ()
Pages:
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Handle: RePEc:bpj:sndecm:v:13:y:2009:i:4:n:3

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Web page: http://www.bepress.com/snde

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Related research
Keywords: labour demand; dismissal protection legislation; firing costs; real options; temporary work agencies; temporary employment;

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Find related papers by JEL classification:
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
J58 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Public Policy
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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  2. Ricardo J. Caballero & Kevin N. Cowan & Eduardo M.R.A. Engel & Alejandro Micco, 2004. "Effective Labor Regulation and Microeconomic Flexibility," Cowles Foundation Discussion Papers 1480, Cowles Foundation, Yale University, revised Oct 2006. [Downloadable!]
    Other versions:
  3. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October. [Downloadable!] (restricted)
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  9. Bovenberg, A. Lans & Graafland, Johan J. & de Mooij, Ruud A., 2000. "Tax reform and the Dutch labor market: an applied general equilibrium approach," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 193-214, October. [Downloadable!] (restricted)
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  10. Michael Neugart & Donald Storrie, 2006. "The emergence of temporary work agencies," Oxford Economic Papers, Oxford University Press, vol. 58(1), pages 137-156, January. [Downloadable!] (restricted)
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  12. Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2006. "Distance to Frontier, Selection, and Economic Growth," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 37-74, 03. [Downloadable!] (restricted)
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  14. Yu-Fu Chen & Michael Funke, 2005. "Product Market Competition, Investment and Employment-Abundant versus Job-Poor Growth: A Real Options Perspective," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  16. Daniel S. Hamermesh, 1995. "Labor Demand and the Source of Adjustment Costs," NBER Working Papers 4394, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  18. Juan Botero & Simeon Djankov & Rafael Porta & Florencio C. Lopez-De-Silanes, 2004. "The Regulation of Labor," The Quarterly Journal of Economics, MIT Press, vol. 119(4), pages 1339-1382, November. [Downloadable!] (restricted)
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    • Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Juan Botero, 2003. "The Regulation of Labor," NBER Working Papers 9756, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  21. Yu-Fu Chen & Michael Funke, 2004. "Working Time and Employment under Uncertainty," Quantitative Macroeconomics Working Papers 20409, Hamburg University, Department of Economics. [Downloadable!]
    Other versions:
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