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

Evaluating Labor Market Reforms: A General Equilibrium Approach

Contents:

Author Info

  • César Alonso-Borrego

    ()
    (Department of Economics,Universidad Carlos III de Madrid)

  • Jesús Fernández-Villaverde

    ()
    (Department of Economics, University of Pennsylvania)

  • José E. Galdón-Sánchez

    ()
    (Department of Economics,Universidad Publica de Navarra)

Abstract

Job security provisions are commonly invoked to explain the high and persistent European unemployment rates. This belief has led several countries to reform their labor markets and liberalize the use of fixed-term contracts. Despite how common such contracts have become after deregulation, there is a lack of quantitative analysis of their impact on the economy. To fill this gap, we build a general equilibrium model with heterogeneous agents and firing costs in the tradition of Hopenhayn and Rogerson (1993). We calibrate our model to Spanish data, choosing in part parameters estimated with firm-level longitudinal data. Spain is particularly interesting, since its labor regulations are among the most protective in the OECD, and both its unemployment and its share of fixed-term employment are the highest. We find that fixed term contracts increase unemployment, reduce output, and raise productivity. The welfare effects are ambiguous.

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://economics.sas.upenn.edu/system/files/working-papers/04-016.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 04-016.

as in new window
Length: 46 pages
Date of creation: 24 Apr 2004
Date of revision:
Handle: RePEc:pen:papers:04-016

Contact details of provider:
Postal: 3718 Locust Walk, Philadelphia, PA 19104
Phone: 215-898-9992
Fax: 215-573-2378
Email:
Web page: http://economics.sas.upenn.edu/pier
More information through EDIRC

Related research

Keywords: Fixed-term contracts; Firing costs; General equilibrium; Heterogeneous agents;

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. 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.
  2. Maia Güell & Barbara Petrongolo, 2000. "Workers Transitions from Temporary to Permanent Employment: the Spanish Case," CEP Discussion Papers dp0438, Centre for Economic Performance, LSE.
  3. Giuseppe Bertola, 2004. "A Pure Theory of Job Security and Labour Income Risk," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 71(1), pages 43-61, 01.
  4. Lars Ljungqvist, 2002. "How Do Lay--off Costs Affect Employment?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 112(482), pages 829-853, October.
  5. Alonso-Borrego, César & Fernández-Villaverde, Jesús & Galdon-Sanchez, Jose Enrique, 2004. "Evaluating Labor Market Reforms: A General Equilibrium Approach," IZA Discussion Papers 1129, Institute for the Study of Labor (IZA).
  6. Victor Aguirregabiria & Cesar Alonso-Borrego, 2014. "Labor Contracts And Flexibility: Evidence From A Labor Market Reform In Spain," Economic Inquiry, Western Economic Association International, vol. 52(2), pages 930-957, 04.
  7. Wasmer, E., 1997. "Competition for Jobs in a Growing Economy and the Emergence of Dualism," DELTA Working Papers, DELTA (Ecole normale supérieure) 97-13, DELTA (Ecole normale supérieure).
  8. Maia Güell, 2000. "Fixed-Term Contracts and Unemployment: An Efficiency Wage Analysis," CEP Discussion Papers dp0461, Centre for Economic Performance, LSE.
  9. Victor Aguirregabiria & Pedro Mira, 1999. "Swapping the Nested Fixed-Point Algorithm: a Class of Estimators for Discrete Markov Decision Models," Computing in Economics and Finance 1999, Society for Computational Economics 332, Society for Computational Economics.
  10. Alison L. Booth & Marco Francesconi & Jeff Frank, 2002. "Temporary Jobs: Stepping Stones Or Dead Ends?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 112(480), pages F189-F213, June.
  11. Bertil Holmlund & Donald Storrie, 2002. "Temporary Work In Turbulent Times: The Swedish Experience," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 112(480), pages F245-F269, June.
  12. Petrongolo, Barbara & Pissarides, Christopher, 2000. "Looking Into The Black Box: A Survey Of The Matching Function," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2409, C.E.P.R. Discussion Papers.
  13. Bertola, Giuseppe & Rogerson, Richard, 1996. "Institutions and Labour Reallocation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1519, C.E.P.R. Discussion Papers.
  14. Carlos Díaz-Moreno & José E. Galdón-Sánchez, 1999. "How important is firm behavior to understand unemployment? Evidence from Spain," Investigaciones Economicas, Fundación SEPI, Fundación SEPI, vol. 23(2), pages 203-224, May.
  15. S. Rao Aiyagari, 1993. "Uninsured idiosyncratic risk and aggregate saving," Working Papers, Federal Reserve Bank of Minneapolis 502, Federal Reserve Bank of Minneapolis.
  16. 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.
  17. Kramarz, Francis & Michaud, Marie-Laure, 2004. "The Shape of Hiring and Separation Costs," IZA Discussion Papers 1170, Institute for the Study of Labor (IZA).
  18. 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.
  19. 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.
  20. Dominique Goux & Eric Maurin & Marianne Pauchet, 1999. "Fixed-term Contracts and the Dynamics of Labour Demand," Working Papers, Centre de Recherche en Economie et Statistique 99-02, Centre de Recherche en Economie et Statistique.
  21. Cahuc, Pierre & Postel-Vinay, Fabien, 2001. "Temporary Jobs, Employment Protection and Labor Market Performance," IZA Discussion Papers 260, Institute for the Study of Labor (IZA).
  22. 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.
  23. 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..
  24. Juan José Dolado & Carlos García-Serrano & Juan F. Jimeno, . "Drawing Lessons from the Boom of Temporary Jobs in Spain," Working Papers 2001-11, FEDEA.
  25. Juan F. Jimeno & Luis Toharia, 1993. "The effects of fixed-term employment on wages: theory and evidence from Spain," Investigaciones Economicas, Fundación SEPI, Fundación SEPI, vol. 17(3), pages 475-494, September.
  26. Victoria Osuna Padilla, 2004. "The Effects of Reducing Firing Costs in Spain: a Lost Opportunity?," Economic Working Papers at Centro de Estudios Andaluces E2004/18, Centro de Estudios Andaluces.
  27. Boeri, Tito, 1998. "Enforcement of Employment Security Regulations, On-The-Job Search and Unemployment Duration," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1850, C.E.P.R. Discussion Papers.
  28. Abowd, John M. & Kramarz, Francis, 2003. "The costs of hiring and separations," Labour Economics, Elsevier, Elsevier, vol. 10(5), pages 499-530, October.
  29. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, Elsevier, vol. 34(4), pages 851-879, June.
  30. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 105(3), pages 699-726, August.
  31. Fernando Alvarez & Marcelo Veracierto, 1999. "Labor market policies in an equilibrium search model," Working Paper Series, Federal Reserve Bank of Chicago WP-99-10, Federal Reserve Bank of Chicago.
  32. 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.
  33. 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.
  34. Moen, E.R., 1995. "Competitive Search Equilibrium," Memorandum, Oslo University, Department of Economics 37/1995, Oslo University, Department of Economics.
  35. 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.
  36. 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.
  37. repec:fth:prinin:444 is not listed on IDEAS
  38. Marcelo Veracierto, 2000. "What are the short-run effects of increasing labor market flexibility?," Working Paper Series, Federal Reserve Bank of Chicago WP-00-29, Federal Reserve Bank of Chicago.
  39. repec:fth:prinin:433 is not listed on IDEAS
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:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

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:pen:papers:04-016. 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: (Dolly Guarini).

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.