The Macroeconomic Impact of Flexible Labour Contracts: An Application to Spain
AbstractThis paper constructs a theoretical model to study the effects on employment of the introduction of flexible labour contracts (i.e. with low firing costs), which occurred in many European countries in the 1980s, which it then tests on Spanish data. The model predicts that such contracts increase the size of the employment response to aggregate shocks, while decreasing its persistence, and that employment overshoots its long-run level at the time these contracts are introduced. Econometric estimates of labour demand based on a panel of large Spanish industrial firms are consistent with several of the model's implications, in particular the increase in the cyclical response of employment.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 596.
Date of creation: Dec 1991
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- Tealdi, Cristina, 2011. "How do employment contract reforms affect welfare? Theory and evidence," MPRA Paper 33573, University Library of Munich, Germany.
- Gorter, C. & Hassink, W. & Nijkamp, P., 1996. "On the endogeneity of output in dynamic labour-demand models," Serie Research Memoranda 0019, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
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