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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. 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.
  2. Shutao Cao & Enchuan Shao & Pedro Silos, 2010. "Fixed-term and permanent employment contracts: theory and evidence," Working Paper 2010-13, Federal Reserve Bank of Atlanta.
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  4. Inés Macho-Stadler & David Pérez-Castrillo & Nicolás Porteiro, 2011. "Optimal Coexistence of Long-term and Short-term contracts in Labor Markets," Working Papers 11.08, Universidad Pablo de Olavide, Department of Economics.
  5. 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.
  6. Renato Faccini, 2008. "Reassessing Labor Market Reforms: Temporary Contracts as a Screening Device," Economics Working Papers ECO2008/27, European University Institute.
  7. Bentolila, Samuel & Cahuc, Pierre & Dolado, Juan José & Le Barbanchon, Thomas, 2010. "Two-Tier Labor Markets in the Great Recession: France vs. Spain," IZA Discussion Papers 5340, Institute for the Study of Labor (IZA).
  8. 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.
  9. Fabio Berton & Pietro Garibladi, 2006. "Workers and Firms Sorting into Temporary Jobs," LABORatorio R. Revelli Working Papers Series 51, LABORatorio R. Revelli, Centre for Employment Studies.
  10. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
  11. 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.
  12. Danielle Venn, 2009. "Legislation, Collective Bargaining and Enforcement: Updating the OECD Employment Protection Indicators," OECD Social, Employment and Migration Working Papers 89, OECD Publishing.
  13. 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.
  14. Andrea Caggese & Vicente Cuñat, 2005. "Financing Constraints and Fixed-Term Employment Contracts," Working Papers 266, Barcelona Graduate School of Economics.
  15. 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).
  16. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, January.
  17. 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.
  18. Saint-Paul, Gilles, 1999. "The Political Economy of Employment Protection," CEPR Discussion Papers 2109, C.E.P.R. Discussion Papers.
  19. L'Haridon, Olivier & Malherbet, Franck, 2006. "Employment Protection Reform in Search Economies," IZA Discussion Papers 2304, Institute for the Study of Labor (IZA).
  20. Eric F. Smith, 2007. "Limited Duration Employment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(3), pages 444-471, July.
  21. 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.
  22. repec:tep:teppwp:wp1013 is not listed on IDEAS
  23. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
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Citations

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Cited by:
  1. 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.
  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. Mário Centeno & Álvaro A. Novo, 2012. "Segmentation," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
  4. 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.
  5. Charlot, Olivier & Malherbet, Franck, 2013. "Education and employment protection," Labour Economics, Elsevier, vol. 20(C), pages 3-23.

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