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Unemployment and Temporary Jobs in the Crisis: Comparing France and Spain

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

Abstract

Our goal here is to explain the strikingly different response of Spanish unemployment relative to other European economies, in particular France, during the ongoing recession. The Spanish unemployment rate, which fell from 22% in 1994 to 8% in 2007, reached 19% by the end of 2009, whereas the French unemployment rate has only increased by less than 2 pp. during the crisis. We argue that labor market institutions in the two economies are rather similar, except for the larger gap between dismissal costs of workers with permanent and temporary contracts in Spain, which lead to huge flows of temporary workers out of and into unemployment. We estimate in a counterfactual scenario that more than one-half of the increase in the unemployment rate would have been avoided had Spain adopted French employment protection institutions before the recession started.

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Bibliographic Info

Paper provided by FEDEA in its series Working Papers with number 2010-07.

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Date of creation: Feb 2010
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Handle: RePEc:fda:fdaddt:2010-07

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References

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  1. 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.
  2. Bentolila, Samuel & Cahuc, Pierre & Dolado, Juan J. & Le Barbanchon, Thomas, 2010. "Two-Tier Labor Markets in the Great Recession: France vs. Spain," CEPR Discussion Papers 8152, C.E.P.R. Discussion Papers.
  3. Ichino, Andrea & Riphahn, Regina T., 2001. "The Effect of Employment Protection on Worker Effort: A Comparison of Absenteeism During and After Probation," IZA Discussion Papers 385, Institute for the Study of Labor (IZA).
  4. Olivier Blanchard & Augustin Landier, 2001. "The Perverse Effects of Partial Labor Market Reform: Fixed Duration Contracts in France," NBER Working Papers 8219, National Bureau of Economic Research, Inc.
  5. 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.
  6. Sala, Hector & Silva, José I. & Toledo, Manuel E., 2008. "Flexibility at the Margin and Labor Market Volatility in OECD Countries," IZA Discussion Papers 3293, Institute for the Study of Labor (IZA).
  7. L'Haridon, Olivier & Malherbe, Franck, 2008. "Employment protection reform in search economies," Les Cahiers de Recherche 910, HEC Paris.
  8. Kramarz, Francis & Philippon, Thomas, 2000. "The Impact of Differential Payroll Tax Subsidies on Minimum Wage Employment," IZA Discussion Papers 219, Institute for the Study of Labor (IZA).
  9. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  10. Malcomson, J., 1998. "Individual employment contracts," Discussion Paper Series In Economics And Econometrics 9804, Economics Division, School of Social Sciences, University of Southampton.
  11. Samuel Bentolila & Juan J. Dolado & Juan F. Jimeno, 2007. "Does Immigration Affect The Phillips Curve? Some Evidence For Spain," Working Papers wp2007_0718, CEMFI.
  12. Samuel Bentolila & Juan F. Jimeno, . "Spanish Unemployment: The End of the Wild Ride?," Working Papers 2003-10, FEDEA.
  13. Bassanini, Andrea & Nunziata, Luca & Venn, Danielle, 2008. "Job Protection Legislation and Productivity Growth in OECD Countries," IZA Discussion Papers 3555, Institute for the Study of Labor (IZA).
  14. Saint-Paul, Gilles, 2000. "The Political Economy of Labour Market Institutions," OUP Catalogue, Oxford University Press, number 9780198293323.
  15. 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.
  16. Lars Ljungqvist, 2002. "How Do Lay--off Costs Affect Employment?," Economic Journal, Royal Economic Society, vol. 112(482), pages 829-853, October.
  17. 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.
  18. 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).
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Citations

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Cited by:
  1. Jose Ignacio García Pérez & Victoria Osuna, 2011. "The effects of introducing a single open-ended contract in the Spanish labour market," Working Papers 11.07, Universidad Pablo de Olavide, Department of Economics.
  2. Pauline Givord, 2011. "Essay on Four Issues in Public Policy Evaluation," Sciences Po publications info:hdl:2441/53r60a8s3ku, Sciences Po.
  3. Nicola Acocella & Laura Bisio & Giovanni Di Bartolomeo & Alessandra Pelloni, . "Labor market imperfections, real wage rigidities and financial shocks," Working Papers 80/11, Sapienza University of Rome, Metodi e modelli per l'economia, il territorio e la finanza MEMOTEF.
  4. Philip, Jung & Moritz, Kuhn, 2011. "The Era of the U.S.-Europe Labor Market Divide: What can we learn?," MPRA Paper 32322, University Library of Munich, Germany.
  5. García-Mainar , Inmaculada & Montuenga-Gómez , Víctor M., 2012. "Wage dynamics in Spain: evidence from individual data (1994-2001)," Investigaciones Regionales, Asociación Española de Ciencia Regional, issue 24, pages 41-58.

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