Advanced Search
MyIDEAS: Login to save this paper or follow this series

Fixed-Term Employment Contracts in an Equilibrium Search Model

Contents:

Author Info

  • Fernando Alvarez
  • Marcelo Veracierto

Abstract

This paper analyzes the effects of fixed-term contracts using a version of the Lucas and Prescott island model with undirected search. A fixed-term contract of length J is modeled as a tax on separations of workers with tenure higher than J . While in principle these policies require a very large state space to analyze the firms and households’ problems, we show that equilibrium allocations solve a simple dynamic programming problem. Analyzing this problem we show that equilibrium employment dynamics are characterized by two dimensional inaction sets. Finally, to understand the effect of these contracts, we compare them with two extreme cases: for J = 1 the fixed-term contracts are equivalent to the case of firing taxes, and for large J they are equivalent to the laissez-faire case. In a calibrated version of the model, we find that temporary contracts with J equivalent to three years length close about half of the gap between those two extremes.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w12791.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12791.

as in new window
Length:
Date of creation: Dec 2006
Date of revision:
Publication status: published as Alvarez, Fernando & Veracierto, Marcelo, 2012. "Fixed-term employment contracts in an equilibrium search model," Journal of Economic Theory, Elsevier, vol. 147(5), pages 1725-1753.
Handle: RePEc:nbr:nberwo:12791

Note: EFG LS
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Cesar Alonso-Borrego & Jesus Fernandez-Villaverde & Jose Galdon-Sanchez, 2004. "Evaluating Labor Market Reforms: A General Equilibrium Approach," Working Papers, Princeton University, Department of Economics, Industrial Relations Section. 866, Princeton University, Department of Economics, Industrial Relations Section..
  2. Juan José Dolado & Carlos García-Serrano & Juan F. Jimeno, . "Drawing Lessons from the Boom of Temporary Jobs in Spain," Working Papers 2001-11, FEDEA.
  3. Carmen Pagés-Serra & James J. Heckman, 2000. "The Cost of Job Security Regulation: Evidence from Latin American Labor Markets," Research Department Publications, Inter-American Development Bank, Research Department 4227, Inter-American Development Bank, Research Department.
  4. 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.
  5. Marcelo Veracierto, 2000. "Employment flows, capital mobility, and policy analysis," Working Paper Series, Federal Reserve Bank of Chicago WP-00-5, Federal Reserve Bank of Chicago.
  6. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(5), pages 915-38, October.
  7. Bentolila, Samuel & Saint-Paul, Gilles, 1992. "The macroeconomic impact of flexible labor contracts, with an application to Spain," European Economic Review, Elsevier, Elsevier, vol. 36(5), pages 1013-1047, June.
  8. Dolado, Juan J. & Garcia-Serrano, Carlos & Jimeno, Juan Francisco, 2001. "Drawing Lessons From the Boom of Temporary Jobs in Spain," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2884, C.E.P.R. Discussion Papers.
  9. Victor Aguirregabiria & Cesar Alonso-Borrego, 2009. "Labor contracts and flexibility : evidence from a labor market reform in Spain," Economics Working Papers we091811, Universidad Carlos III, Departamento de Economía.
  10. Carmen Pagés-Serra, 2000. "The Cost of Job Security Regulation: Evidence from Latin American Labor Markets," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  11. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 11(3), pages 55-74, Summer.
  12. Giuseppe BERTOLA & Tito BOERI & Sandrine CAZES, 2000. "Employment protection in industrialized countries: The case for new indicators," International Labour Review, International Labour Organization, International Labour Organization, vol. 139(1), pages 57-72, 03.
  13. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 57(3), pages 381-402, July.
  14. Prescott, Edward C & Mehra, Rajnish, 1980. "Recursive Competitive Equilibrium: The Case of Homogeneous Households," Econometrica, Econometric Society, Econometric Society, vol. 48(6), pages 1365-79, September.
  15. Cabrales, Antonio & Hopenhayn, Hugo A., 1997. "Labor-market flexibility and aggregate employment volatility," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 46(1), pages 189-228, June.
  16. Fernando Alvarez & Marcelo Veracierto, 2000. "Labor-Market Policies in an Equilibrium Search Model," NBER Chapters, in: NBER Macroeconomics Annual 1999, Volume 14, pages 265-316 National Bureau of Economic Research, Inc.
  17. 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.
  18. Alvarez, Fernando & Veracierto, Marcelo, 2001. "Severance payments in an economy with frictions," Journal of Monetary Economics, Elsevier, Elsevier, vol. 47(3), pages 477-498, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Shutao Cao & Enchuan Shao & Pedro Silos, 2010. "Fixed-term and permanent employment contracts: theory and evidence," Working Paper, Federal Reserve Bank of Atlanta 2010-13, Federal Reserve Bank of Atlanta.
  2. Daniele Coen-Pirani, . "Understanding Gross Workers Flows Across U.S. States," GSIA Working Papers, Carnegie Mellon University, Tepper School of Business 2006-E68, Carnegie Mellon University, Tepper School of Business.
  3. Marcelo Veracierto, 2007. "Establishments dynamics and matching frictions in classical competitive equilibrium," Working Paper Series, Federal Reserve Bank of Chicago WP-07-16, Federal Reserve Bank of Chicago.
  4. Marcelo Veracierto & Jonas Fisher & Morris Davis, 2014. "Gross Migration, Housing and Urban Population Dynamics," 2014 Meeting Papers, Society for Economic Dynamics 324, Society for Economic Dynamics.
  5. Davis, Morris A. & Fisher, Jonas D. M. & Veracierto, Marcelo, 2013. "Gross Migration, Housing and Urban Population Dynamics," Working Paper Series, Federal Reserve Bank of Chicago WP-2013-19, Federal Reserve Bank of Chicago.
  6. Veracierto, Marcelo, 2007. "On the short-run effects of labor market reforms," Journal of Monetary Economics, Elsevier, Elsevier, vol. 54(4), pages 1213-1229, May.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:12791. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.