Enforcement of employment security regulations, on-the-job search and unemployment duration
Contrary to the popular wisdom, ‘sclerotic’ European labour markets are characterized by relatively large job turnover rates. A model is developed which – unlike standard theories of job matching with on-the-job search – can account for the coexistence of strict employment security regulations, significant job-to-job shifts and high long-term unemployment rates in these countries. This is because: i) employment security regulations can only be enforced by increasing the number of workers on ‘short-term jobs’; and ii) the latter compete for jobs with unemployed jobseekers. Evidence is presented, showing that job finding probabilities of the unemployed are decreasing in the incidence of temporary employment, in line with the predictions of the model.
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- Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
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- Olivier Jean Blanchard & Peter A. Diamond, 1989. "The Aggregate Matching Function," NBER Working Papers 3175, National Bureau of Economic Research, Inc.
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- Hall, Robert E, 1982. "The Importance of Lifetime Jobs in the U.S. Economy," American Economic Review, American Economic Association, vol. 72(4), pages 716-724, September.
- Robert E. Hall, 1980. "The Importance of Lifetime Jobs in the U.S. Economy," NBER Working Papers 0560, National Bureau of Economic Research, Inc.
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