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Explaining the Spread of Temporary Jobs and its Impact on Labor Turnover

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Author Info

  • Cahuc, Pierre

    ()
    (Ecole Polytechnique, Paris)

  • Charlot, Olivier

    ()
    (University of Cergy-Pontoise)

  • Malherbet, Franck

    ()
    (University of Rouen)

Abstract

This paper provides a simple model which explains the choice between permanent and temporary jobs. This model, which incorporates important features of actual employment protection legislations neglected by the economic literature so far, reproduces the main stylized facts about entries into permanent and temporary jobs observed in Continental European countries. We show that the stringency of legal constraints on the termination of permanent jobs has a strong positive impact on the turnover of temporary jobs. We also find that job protection has very small effects on total employment but induces large substitution of temporary jobs for permanent jobs which significantly reduces aggregate production.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6365.

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Length: 55 pages
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6365

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Keywords: temporary jobs; employment protection legislation;

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References

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  1. Renato Faccini, 2008. "Reassessing Labor Market Reforms: Temporary Contracts as a Screening Device," Economics Working Papers ECO2008/27, European University Institute.
  2. Andrea Caggese & Vicente Cuñat, 2005. "Financing Constraints and Fixed-Term Employment Contracts," Working Papers 266, Barcelona Graduate School of Economics.
  3. 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.
  4. Centeno, Mario & Novo, Alvaro A., 2011. "Excess Worker Turnover and Fixed-Term Contracts: Causal Evidence in a Two-Tier System," IZA Discussion Papers 6239, Institute for the Study of Labor (IZA).
  5. César Alonso-Borrego & Jesús Fernández-Villaverde & José E. Galdón-Sánchez, 2005. "Evaluating Labor Market Reforms: A General Equilibrium Approach," NBER Working Papers 11519, National Bureau of Economic Research, Inc.
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  7. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  8. Petrongolo, Barbara & Pissarides, Christopher, 2000. "Looking Into The Black Box: A Survey Of The Matching Function," CEPR Discussion Papers 2409, C.E.P.R. Discussion Papers.
  9. 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.
  10. Samuel Bentolila & Pierre Cahuc & Juan J. Dolado & Thomas Le Barbanchon, 2010. "Two-Tier Labor Markets In The Great Recession: France Vs. Spain," Working Papers wp2010_1009, CEMFI.
  11. Fabio Berton & Pietro Garibaldi, 2012. "Workers and Firms Sorting into Temporary Jobs," Economic Journal, Royal Economic Society, vol. 122(562), pages F125-F154, 08.
  12. Inés Macho-Stadler & David Pérez-Castrillo & Nicolés Porteiro, 2011. "Optimal Coexistence of Long-Term and Short-Term Contracts in Labor Markets," Working Papers 557, Barcelona Graduate School of Economics.
  13. José Varejão & Pedro Portugal, 2003. "Why Do Firms Use Fixed-Term Contracts?," CEF.UP Working Papers 0310, Universidade do Porto, Faculdade de Economia do Porto.
  14. James Costain & Juan F. Jimeno & Carlos Thomas, 2010. "Employment fluctuations in a dual labor market," Banco de Espa�a Working Papers 1013, Banco de Espa�a.
  15. Lorenzo Cappellari & Carlo Dell'Aringa & Marco Leonardi, 2011. "Temporary Employment, Job Flows and Productivity: A Tale of two Reforms," CESifo Working Paper Series 3520, CESifo Group Munich.
  16. Anne Bucher, 2010. "Hiring Practices, Employment Protection and Temporary Jobs," TEPP Working Paper 2010-13, TEPP.
  17. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
  18. Danielle Venn, 2009. "Legislation, Collective Bargaining and Enforcement: Updating the OECD Employment Protection Indicators," OECD Social, Employment and Migration Working Papers 89, OECD Publishing.
  19. L'Haridon, Olivier & Malherbe, Franck, 2008. "Employment protection reform in search economies," Les Cahiers de Recherche 910, HEC Paris.
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  21. Gilles Saint-Paul, 2002. "The Political Economy of Employment Protection," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 672-701, June.
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  23. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  24. 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.
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Cited by:
  1. Lorenzo Cappellari & Carlo Dell’Aringa & Marco Leonardi, 2012. "Temporary Employment, Job Flows and Productivity: A Tale of Two Reforms," Economic Journal, Royal Economic Society, vol. 122(562), pages F188-F215, 08.
  2. Mário Centeno & Álvaro A. Novo, 2012. "Excess worker turnover and fixed-term contracts: Causal evidence in a two-tier system," Working Papers w201205, Banco de Portugal, Economics and Research Department.
  3. Le Barbanchon, Thomas & Malherbet, Franck, 2013. "An anatomy of the French labour market : country case studies on labour market segmentation," ILO Working Papers 481497, International Labour Organization.
  4. Mário Centeno & Álvaro A. Novo, 2012. "Segmentation," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
  5. Charlot, Olivier & Malherbet, Franck, 2013. "Education and employment protection," Labour Economics, Elsevier, vol. 20(C), pages 3-23.

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