IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Education and employment protection

Listed author(s):
  • Charlot, Olivier
  • Malherbet, Franck

In this paper, we generalize the study of the return to education undertaken in e.g. Laing et al. (1995) and Burdett and Smith (2002) to an environment where the link between education and job destruction is taken into account. This enables us to study how a European-type Employment Protection Legislation (EPL) with heavily regulated long-term contracts and more flexible short-term contracts affects the return to schooling, equilibrium unemployment and welfare. In this context, we show that firing costs and temporary employment have opposite effects on the rate of use of human capital and thus, on educational investments. We furthermore demonstrate that a laissez-faire economy with no regulation is inefficient as it is characterized by insufficient educational investments leading to excess job destruction and inadequate job creation. By stabilizing employment, firing costs could spur educational investments and therefore lead to gains in welfare and productivity, though a first-best policy would be to subsidize education. However, there is little chance that a rise in firing costs in a dual (European-type) EPL context would raise the incentives to schooling and aggregate welfare.

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.sciencedirect.com/science/article/pii/S0927537112001030
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 20 (2013)
Issue (Month): C ()
Pages: 3-23

as
in new window

Handle: RePEc:eee:labeco:v:20:y:2013:i:c:p:3-23
DOI: 10.1016/j.labeco.2012.09.004
Contact details of provider: Web page: http://www.elsevier.com/locate/labeco

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. Barbara Petrongolo & Christopher A. Pissarides, 2000. "Looking Into the Black Box: A Survey of the Matching Function," CEP Discussion Papers dp0470, Centre for Economic Performance, LSE.
  2. Burdett, Ken & Smith, Eric, 2002. "The low skill trap," European Economic Review, Elsevier, vol. 46(8), pages 1439-1451, September.
  3. 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).
  4. Shutao Cao & Enchuan Shao & Pedro Silos, 2010. "Fixed-Term and Permanent Employment Contracts: Theory and Evidence," CESifo Working Paper Series 3150, CESifo Group Munich.
  5. Renato Faccini, 2008. "Reassessing Labor Market Reforms: Temporary Contracts as a Screening Device," Economics Working Papers ECO2008/27, European University Institute.
  6. Acemoglu, Daron & Shimer, Robert, 1999. "Holdups and Efficiency with Search Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 827-849, November.
  7. Centeno, Mário & Novo, Álvaro A., 2012. "Excess worker turnover and fixed-term contracts: Causal evidence in a two-tier system," Labour Economics, Elsevier, vol. 19(3), pages 320-328.
  8. Samuel Bentolila & Pierre Cahuc & Juan Jose Dolado & Thomas Le Barbanchon, 2010. "Two-Tier Labor Markets in the Great Recession: France vs. Spain," CESifo Working Paper Series 3269, CESifo Group Munich.
  9. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 279-298.
  10. Alison L. Booth & Marco Francesconi & Jeff Frank, 2002. "Temporary Jobs: Stepping Stones Or Dead Ends?," Economic Journal, Royal Economic Society, vol. 112(480), pages 189-213, June.
  11. Lars Ljungqvist, 2002. "How Do Lay--off Costs Affect Employment?," Economic Journal, Royal Economic Society, vol. 112(482), pages 829-853, October.
  12. Wasmer, E., 1997. "Competition for Jobs in a Growing Economy and the Emergence of Dualism," DELTA Working Papers 97-13, DELTA (Ecole normale supérieure).
  13. Olivier Charlot & Franck Malherbert, 2010. "Education and the Welfare Gains from Employment Protection," Cahiers de recherche 1012, CIRPEE.
  14. James Costain & Juan F. Jimeno & Carlos Thomas, 2010. "Employment fluctuations in a dual labour market," Economic Bulletin, Banco de España;Economic Bulletin Homepage, issue APR, April.
  15. Güell, Maia & Petrongolo, Barbara, 2003. "How Binding Are Legal Limits? Transitions from Temporary to Permanent Work in Spain," IZA Discussion Papers 782, Institute for the Study of Labor (IZA).
  16. Card, David, 2001. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, vol. 69(5), pages 1127-1160, September.
  17. Giuseppe Bertola, 2004. "A Pure Theory of Job Security and Labour Income Risk," Review of Economic Studies, Oxford University Press, vol. 71(1), pages 43-61.
  18. Edward P. Lazear, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 699-726.
  19. Mortensen, Dale T & Pissarides, Christopher A, 1999. "Unemployment Responses to 'Skill-Biased' Technology Shocks: The Role of Labour Market Policy," Economic Journal, Royal Economic Society, vol. 109(455), pages 242-265, April.
  20. Juan J Dolado & Carlos Garcia--Serrano & Juan F. Jimeno, 2002. "Drawing Lessons From The Boom Of Temporary Jobs In Spain," Economic Journal, Royal Economic Society, vol. 112(721), pages 270-295, June.
  21. Daron Acemoglu, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, Oxford University Press, vol. 111(3), pages 779-804.
  22. Pietro Garibaldi & Giovanni L. Violante, 2005. "The Employment Effects of Severance Payments with Wage Rigidities," Economic Journal, Royal Economic Society, vol. 115(506), pages 799-832, October.
  23. Kramarz, Francis & Michaud, Marie-Laure, 2010. "The shape of hiring and separation costs in France," Labour Economics, Elsevier, vol. 17(1), pages 27-37, January.
  24. Cahuc, Pierre & Malherbet, Franck, 2002. "Unemployment Compensation Finance and Labor Market Rigidity," IZA Discussion Papers 581, Institute for the Study of Labor (IZA).
  25. Kramarz, Francis & Michaud, Marie-Laure, 2003. "The Shape of Hiring and Separation Costs," CEPR Discussion Papers 3685, C.E.P.R. Discussion Papers.
  26. Fabio Berton & Pietro Garibaldi, 2012. "Workers and Firms Sorting into Temporary Jobs," Economic Journal, Royal Economic Society, vol. 122(562), pages 125-154, 08.
  27. Belot, M.V.K. & Boone, J. & van Ours, J.C., 2007. "Welfare improving employment protection," Other publications TiSEM eee2f823-1384-4a2f-a4eb-7, Tilburg University, School of Economics and Management.
  28. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  29. Anne Bucher, 2010. "Hiring Practices, Employment Protection and Temporary Jobs," TEPP Working Paper 2010-13, TEPP.
  30. Cahuc, Pierre & Charlot, Olivier & Malherbet, Franck, 2012. "Explaining the Spread of Temporary Jobs and its Impact on Labor Turnover," IZA Discussion Papers 6365, Institute for the Study of Labor (IZA).
  31. 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).
  32. Charlot, Olivier & Decreuse, Bruno, 2006. "Over-education for the rich, under-education for the poor: a search-theoretic microfoundation," MPRA Paper 3624, University Library of Munich, Germany, revised Apr 2007.
  33. Charlot, Olivier & Decreuse, Bruno, 2005. "Self-selection in education with matching frictions," Labour Economics, Elsevier, vol. 12(2), pages 251-267, April.
  34. Boeri, Tito, 2011. "Institutional Reforms and Dualism in European Labor Markets," Handbook of Labor Economics, Elsevier.
  35. Malcomson, J.M., 1997. "Contracts, hold-up and labor markets," Discussion Paper Series In Economics And Econometrics 9703, Economics Division, School of Social Sciences, University of Southampton.
  36. Daniel Cohen & Arnaud Lefranc & Gilles Saint-Paul, 1997. "French unemployment: a transatlantic perspective," Economic Policy, CEPR;CES;MSH, vol. 12(25), pages 265-292, October.
  37. Masters, Adrian M, 1998. "Efficiency of Investment in Human and Physical Capital in a Model of Bilateral Search and Bargaining," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 477-494, May.
  38. Pissarides, Christopher A., 2001. "Employment protection," Labour Economics, Elsevier, vol. 8(2), pages 131-159, May.
  39. Ricardo J. Caballero & Mohamad L. Hammour, 1994. "On the Timing and Efficiency of Creative Destruction," NBER Working Papers 4768, National Bureau of Economic Research, Inc.
  40. Acemoglu, Daron, 2001. "Good Jobs versus Bad Jobs," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 1-21, January.
  41. Moen, Espen R, 1999. "Education, Ranking, and Competition for Jobs," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 694-723, October.
  42. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  43. Derek Laing & Theodore Palivos & Ping Wang, 1995. "Learning, Matching and Growth," Review of Economic Studies, Oxford University Press, vol. 62(1), pages 115-129.
  44. 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.
  45. Andrea Caggese & Vicente Cuñat, 2008. "Financing Constraints and Fixed-term Employment Contracts," Economic Journal, Royal Economic Society, vol. 118(533), pages 2013-2046, November.
  46. Grout, Paul A, 1984. "Investment and Wages in the Absence of Binding Contracts: A Nash Bargining Approach," Econometrica, Econometric Society, vol. 52(2), pages 449-460, March.
  47. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier.
  48. Charlot, Olivier & Decreuse, Bruno & Granier, Pierre, 2005. "Adaptability, productivity, and educational incentives in a matching model," European Economic Review, Elsevier, vol. 49(4), pages 1007-1032, May.
Full references (including those not matched with items on IDEAS)

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

When requesting a correction, please mention this item's handle: RePEc:eee:labeco:v:20:y:2013:i:c:p:3-23. 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: (Dana Niculescu)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.