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Two-Tier Labor Markets in the Great Recession: France vs. Spain

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  • Bentolila, Samuel
  • Cahuc, Pierre
  • Dolado, Juan J.
  • Le Barbanchon, Thomas

Abstract

This paper analyzes the strikingly different response of unemployment to the Great Recession in France and Spain. Their labor market institutions are similar and their unemployment rates just before the crisis were both around 8%. Yet, in France, unemployment rate has increased by 2 percentage points, whereas in Spain it has shot up to 19% by the end of 2009. We assess what part of this differential is due to the larger gap between the dismissal costs of permanent and temporary contracts and the less restrictive rules regarding the use of the latter contracts in Spain. Using a calibrated search and matching model, we estimate that about 45% of the surge in Spanish unemployment could have been avoided had Spain adopted French employment protection legislation before the crisis started.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8152.

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Date of creation: Dec 2010
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Handle: RePEc:cpr:ceprdp:8152

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Keywords: Great Recesssion; temporary contracts; unemployment;

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References

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  1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877.
  2. Samuel Bentolila & Juan F. Jimeno, 2003. "Spanish Unemployment: The End of the Wild Ride?," CESifo Working Paper Series 940, CESifo Group Munich.
  3. Bentolila, Samuel & Dolado, Juan J. & Jimeno, Juan Francisco, 2007. "Does Immigration Affect the Phillips Curve? Some Evidence for Spain," CEPR Discussion Papers 6604, C.E.P.R. Discussion Papers.
  4. Becker, Sascha O. & Bentolila, Samuel & Fernandes, Ana & Ichino, Andrea, 2005. "Youth Emancipation and Perceived Job Insecurity of Parents and Children," IZA Discussion Papers 1836, Institute for the Study of Labor (IZA).
  5. Sala, Hector & Silva, José I. & Toledo, Manuel E., . "Flexibility at the margin and labor market volatility in OECD countries," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/928, Universidad Carlos III de Madrid.
  6. Cahuc, Pierre & Postel-Vinay, Fabien, 2001. "Temporary Jobs, Employment Protection and Labor Market Performance," IZA Discussion Papers 260, Institute for the Study of Labor (IZA).
  7. Olivier L'Haridon & Franck Malherbet, 2008. "Employment Protection Reform in Search Economies," THEMA Working Papers 2008-26, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  8. Pierre Cahuc & Stéphane Carcillo, 2006. "The Shortcomings of a Partial Release of Employment Protection Laws: The Case of the 2005 French Reform," IMF Working Papers 06/301, International Monetary Fund.
  9. Andrea Ichino & Regina T. Riphahn, 2001. "The Effect of Employment Protection on Worker Effort. A Comparison of Absenteeism During and After Probation," CESifo Working Paper Series 596, CESifo Group Munich.
  10. Bentolila, Samuel & Saint-Paul, Gilles, 1992. "The macroeconomic impact of flexible labor contracts, with an application to Spain," European Economic Review, Elsevier, vol. 36(5), pages 1013-1047, June.
  11. Kramarz, Francis & Philippon, Thomas, 2001. "The impact of differential payroll tax subsidies on minimum wage employment," Journal of Public Economics, Elsevier, vol. 82(1), pages 115-146, October.
  12. Rupert, Peter & Wasmer, Etienne, 2009. "Housing and the Labor Market: Time to Move and Aggregate Unemployment," University of California at Santa Barbara, Economics Working Paper Series qt1bv529kn, Department of Economics, UC Santa Barbara.
  13. Wasmer, E., 1997. "Competition for Jobs in a Growing Economy and the Emergence of Dualism," DELTA Working Papers 97-13, DELTA (Ecole normale supérieure).
  14. Garibaldi, Pietro, 1998. "Job flow dynamics and firing restrictions," European Economic Review, Elsevier, vol. 42(2), pages 245-275, February.
  15. Blanchard, Olivier Jean & Landier, Augustin, 2002. "The Perverse Effects of Partial Labor Market Reform: Fixed Duration Contracts in France," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
  16. Samuel Bentolila, . "Internal migration in Spain," Working Papers 2001-07, FEDEA.
  17. Samuel Bentolila & Juan Jose Dolado & Juan F. Jimeno, 2008. "Two-tier Employment Protection Reforms: The Spanish Experience," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 6(4), pages 49-56, December.
  18. Martin Werding (ed.), 2006. "Structural Unemployment in Western Europe: Reasons and Remedies," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262232464.
  19. James Costain & Juan F. Jimeno & Carlos Thomas, 2010. "Employment fluctuations in a dual labor market," Banco de España Working Papers 1013, Banco de España.
  20. Saint-Paul, Gilles, 2000. "The Political Economy of Labour Market Institutions," OUP Catalogue, Oxford University Press, number 9780198293323, September.
  21. Yolanda Rebollo Sanz & J. Ignacio García-Pérez, 2009. "Do wage subsidies affect the subsequent employment stability of permanent workers?: the case of Spain," Working Papers 09.18, Universidad Pablo de Olavide, Department of Economics.
  22. Samuel Bentolila & Andrea Ichino, 2008. "Unemployment and consumption near and far away from the Mediterranean," Journal of Population Economics, Springer, vol. 21(2), pages 255-280, April.
  23. F. Bouvet, 2012. "The Beveridge curve in Europe: new evidence using national and regional data," Applied Economics, Taylor and Francis Journals, vol. 44(27), pages 3585-3604, September.
  24. Miguel-Angel Lopez-Garcia, 2004. "Housing, prices and tax policy in Spain," Spanish Economic Review, Springer, vol. 6(1), pages 29-52, April.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Two-Tier Labor Markets in the Great Recession: France vs. Spain
    by maximorossi in NEP-LTV blog on 2010-12-13 13:39:18
  2. Spain: how to mess with the labor market
    by Economic Logician in Economic Logic on 2011-01-19 15:13:00
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