What are the short-run effects of increasing labor market flexibility?
AbstractThis paper evaluates the short-run effects of introducing labor market flexibility to an economy characterized by large firing taxes. Different reforms are considered: 1) eliminating all firing taxes, 2) introducing flexible new contracts while retaining the firing taxes on workers employed previous to the reform, and 3) introducing temporary contracts. The paper finds that eliminating all firing taxes increases the unemployment rate much more in the short run than in the long run, that introducing new flexible contracts has similar effects as eliminating all firing taxes, and that introducing temporary contracts of short durations can decrease the unemployment rate, but only in the short-run.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-00-29.
Date of creation: 2000
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-08-15 (All new papers)
- NEP-DGE-2001-08-15 (Dynamic General Equilibrium)
- NEP-LAB-2001-08-15 (Labour Economics)
- NEP-LTV-2001-08-15 (Unemployment, Inequality & Poverty)
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