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The Perverse Effects of Partial Labour Market Reform: fixed--Term Contracts in France

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  • O Blanchard
  • A Landier

Abstract

We argue that the effects of a partial reform of employment protection by allowing firms to hire workers on fixed--term contracts may be perverse. The main effect may be high turnover in entry--level jobs, leading to higher, not lower, unemployment. Even if unemployment falls, workers may be worse off, going through many spells of unemployment and entry--level jobs, before obtaining a regular job. Considering French data for young workers since the early 1980s, we conclude that the reforms have substantially increased turnover, without a substantial reduction in unemployment duration. If anything, the effect on their welfare appears to have been negative. Copyright 2002 Royal Economic Society

Suggested Citation

  • O Blanchard & A Landier, 2002. "The Perverse Effects of Partial Labour Market Reform: fixed--Term Contracts in France," Economic Journal, Royal Economic Society, vol. 112(480), pages 214-244, June.
  • Handle: RePEc:ecj:econjl:v:112:y:2002:i:480:p:f214-f244
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    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.
    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. Thierry Magnac & Michael Visser, 1999. "Transition Models With Measurement Errors," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 466-474, August.
    4. Fougere, Denis & Kramarz, Francis & Magnac, Thierry, 2000. "Youth employment policies in France," European Economic Review, Elsevier, vol. 44(4-6), pages 928-942, May.
    5. Olivier Blanchard & Pedro Portugal, 1998. "What Hides Behind an Umemployment Rate: Comparing Portuguese and U.S. Unemployment," NBER Working Papers 6636, National Bureau of Economic Research, Inc.
    6. Caballero, Ricardo J & Hammour, Mohamad L, 1996. "The "Fundamental Transformation" in Macroeconomics," American Economic Review, American Economic Association, vol. 86(2), pages 181-186, May.
    7. Edward P. Lazear, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 699-726.
    8. P Adam & P Canziani, 1998. "Partial De-Regulation: Fixed-Term Contracts in Italy and Spain," CEP Discussion Papers dp0386, Centre for Economic Performance, LSE.
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