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

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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.

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Bibliographic Info

Article provided by De Gruyter in its journal Studies in Nonlinear Dynamics & Econometrics.

Volume (Year): 13 (2009)
Issue (Month): 4 (September)
Pages: 1-29

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Handle: RePEc:bpj:sndecm:v:13:y:2009:i:4:n:3

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  1. Michael Neugart & Donald Storrie, 2006. "The emergence of temporary work agencies," Oxford Economic Papers, Oxford University Press, vol. 58(1), pages 137-156, January.
  2. Bovenberg, A.L. & Graafland, J.J. & Mooij, R.A. de, 2000. "Tax reform and the Dutch labour market: An applied general equilibrium approach," Open Access publications from Tilburg University urn:nbn:nl:ui:12-83974, Tilburg University.
  3. Nilsen, Øivind Anti & Salvanes, Kjell G. & Schiantarelli, Fabio, 2003. "Employment Changes, the Structure of Adjustment Costs, and Plant Size," Working Papers in Economics 11/03, University of Bergen, Department of Economics.
  4. Orszag, Mike & Snower, Dennis J., 1998. "Anatomy of policy complementarities," Open Access Publications from Kiel Institute for the World Economy 2252, Kiel Institute for the World Economy (IfW).
  5. Chen, Yu-Fu & Funke, Michael, 2008. "Product market competition, investment and employment-abundant versus job-poor growth: A real options perspective," European Journal of Political Economy, Elsevier, vol. 24(1), pages 218-238, March.
  6. Díaz-Vázquez, Pilar & Snower, Dennis J., 2003. "Can insider power affect employment?," Open Access Publications from Kiel Institute for the World Economy 2992, Kiel Institute for the World Economy (IfW).
  7. Julián Messina & Giovanna Vallanti, 2007. "Job Flow Dynamics and Firing Restrictions: Evidence from Europe," Economic Journal, Royal Economic Society, vol. 117(521), pages 279-301, 06.
  8. Yu-Fu Chen & Michael Funke, 2002. "Working Time and Employment under Uncertainty," Dundee Discussion Papers in Economics 134, Economic Studies, University of Dundee.
  9. Roberto M. Samaniego, 2006. "Employment Protection and High-Tech Aversion," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(2), pages 224-241, April.
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Cited by:
  1. Michael Beckmann & Dieter Kuhn, 2012. "Flexibility vs. screening: The performance effects of temporary agency work strategies," Working papers 2012/03, Faculty of Business and Economics - University of Basel.
  2. Christian Merkl & Tom Schmitz, 2009. "Macroeconomic Volatilities and the Labor Market: First Results from the Euro Experiment," Kiel Working Papers 1511, Kiel Institute for the World Economy.

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