Contrary to the popular wisdom, ‘sclerotic’ European labour markets are characterized by relatively large job turnover rates. A model is developed which – unlike standard theories of job matching with on-the-job search – can account for the coexistence of strict employment security regulations, significant job-to-job shifts and high long-term unemployment rates in these countries. This is because: i) employment security regulations can only be enforced by increasing the number of workers on ‘short-term jobs’; and ii) the latter compete for jobs with unemployed jobseekers. Evidence is presented, showing that job finding probabilities of the unemployed are decreasing in the incidence of temporary employment, in line with the predictions of the model.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
1850.
Find related papers by JEL classification: J10 - Labor and Demographic Economics - - Demographic Economics - - - General J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
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