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The Shortcomings of a Partial Release of Employment Protection Laws: The Case of the 2005 French Reform

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Author Info
Pierre Cahuc
Stéphane Carcillo

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Abstract

This paper proposes an ex ante evaluation of the effects of new labor contracts such as the "Contrat Nouvelle Embauche" (CNE) introduced in France in 2005. The lessons we draw are of sufficiently general interest to be applicable to other countries or reforms of employment protection laws. Using a model that captures the characteristics of the French labor market, we simulate the effects of this reform on unemployment, employment, and welfare. We estimate that the CNE will lead to the creation of 70,000 additional jobs in the long run, but at the cost of a slight deterioration in welfare.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/301.

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Length: 40 pages
Date of creation: 11 Jan 2007
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Handle: RePEc:imf:imfwpa:06/301

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Keywords: Employment policy ; France ; Labor markets ; Social safety nets ; Unemployment ; Economic models ;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
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  1. Cahuc, Pierre & Postel-Vinay, Fabien, 2002. "Temporary jobs, employment protection and labor market performance," Labour Economics, Elsevier, vol. 9(1), pages 63-91, February. [Downloadable!] (restricted)
  2. Cahuc, Pierre & Malherbet, Franck, 2004. "Unemployment compensation finance and labor market rigidity," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 481-501, March. [Downloadable!] (restricted)
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  3. Kramarz, Francis & Michaud, Marie-Laure, 2003. "The Shape of Hiring and Separation Costs," CEPR Discussion Papers 3685, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  4. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Blackwell Publishing, vol. 61(3), pages 397-415, July. [Downloadable!] (restricted)
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  5. Goux, Dominique & Maurin, Eric & Pauchet, Marianne, 2001. "Fixed-term contracts and the dynamics of labour demand," European Economic Review, Elsevier, vol. 45(3), pages 533-552, March. [Downloadable!] (restricted)
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  6. 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. [Downloadable!] (restricted)
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  7. Jian-Ping Zhou, 2006. "Reforming Employment Protection Legislation in France," IMF Working Papers 06/108, International Monetary Fund. [Downloadable!]
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