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

Author

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  • Chen Yu-Fu

    (University of Dundee)

  • Funke Michael

    (Hamburg University)

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.

Suggested Citation

  • Chen Yu-Fu & Funke Michael, 2009. "Threshold Effects of Dismissal Protection Regulation and the Emergence of Temporary Work Agencies," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 13(4), pages 1-29, September.
    • Handle: RePEc:bpj:sndecm:v:13:y:2009:i:4:n:3
    DOI: 10.2202/1558-3708.1679
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    Cited by:

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    2. Beckmann, Michael & Kuhn, Dieter, 2012. "Flexibility vs. screening : the performance effects of temporary agency work strategies," Working papers 2012/03, Faculty of Business and Economics - University of Basel.

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    More about this item

    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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