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Financial incentives and labour market duality

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  • Berson, Clémence
  • Ferrari, Nicolas

Abstract

The French labour market is divided between workers in permanent jobs and those who alternate fixed-term contracts with unemployment spells. Among other public policies aiming at reducing this duality, financial incentives could induce employers to lengthen contract duration or favour permanent contracts. This article develops a matching model fitted to the French labour market characteristics and calibrated on French data. A gradual decrease in unemployment contributions or a firing tax reduces the share of short-term contract in total employment but increases market rigidity and lowers labour productivity. However, decreasing unemployment contributions gradually is less favourable for new entrants than a firing tax and lengthens unemployment spells. An additional contribution levied on short-term contracts to finance a bonus for permanent-contract hirings also decreases labour market duality and increases activity by 0.13% but without negative impacts on labour market flexibility and productivity.

Suggested Citation

  • Berson, Clémence & Ferrari, Nicolas, 2015. "Financial incentives and labour market duality," Labour Economics, Elsevier, vol. 37(C), pages 77-92.
  • Handle: RePEc:eee:labeco:v:37:y:2015:i:c:p:77-92
    DOI: 10.1016/j.labeco.2015.10.001
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    References listed on IDEAS

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    Cited by:

    1. Benghalem, Hélène & Cahuc, Pierre & Charlot, Olivier & Limon, Emeline & Malherbet, Franck, 2016. "Taxation of Temporary Jobs: Good Intentions With Bad Outcomes ?," CEPR Discussion Papers 11628, C.E.P.R. Discussion Papers.
    2. C. Berson & N. Ferrari, 2016. "What policy to reduce labour market segmentation?," Rue de la Banque, Banque de France, issue 35, december..
    3. repec:kap:decono:v:166:y:2018:i:4:d:10.1007_s10645-018-9318-y is not listed on IDEAS

    More about this item

    Keywords

    Temporary jobs; Duality; Public policies;

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy

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