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Dual labor markets and labor protection in an estimated search and matching model

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  • Tejada, Mauricio M.

Abstract

This paper estimates a search and matching model with labor protection and dual labor markets in which the relative availability of temporary versus permanent contracts in the market is endogenous. Chilean data is used to evaluate the role of labor protection legislation and the use of temporary contracts in unemployment, welfare, and inequality. Results show that the share of temporary contracts in the labor market becomes more important as firing costs increase. Simultaneously, temporary contracts negatively affect the frequency with which regular jobs arrive and offset any positive effect of firing costs on unemployment. Finally, temporary contracts increase flexibility and generate increasing welfare gains as labor protection becomes more stringent.

Suggested Citation

  • Tejada, Mauricio M., 2017. "Dual labor markets and labor protection in an estimated search and matching model," Labour Economics, Elsevier, vol. 46(C), pages 26-46.
    • Handle: RePEc:eee:labeco:v:46:y:2017:i:c:p:26-46
    DOI: 10.1016/j.labeco.2017.03.002
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    Cited by:

    1. Normann Rion, 2019. "Waiting for the Prince Charming: Fixed-Term Contracts as Stopgaps," Working Papers halshs-02331887, HAL.
    2. Matteo Picchio & Mattia Filomena, 2021. "Are Temporary Jobs Stepping Stones Or Dead Ends? A Meta-Analytical Review Of The Literature," Working Papers 455, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    3. Mattia Filomena & Matteo Picchio, 2022. "Are temporary jobs stepping stones or dead ends? A systematic review of the literature," International Journal of Manpower, Emerald Group Publishing Limited, vol. 43(9), pages 60-74, August.
    4. Bustelo, Monserrat & Flabbi, Luca & Piras, Claudia & Tejada, Mauricio, 2019. "Female Labor Force Participation, Labor Market Dynamic and Growth in LAC," IDB Publications (Working Papers) 9420, Inter-American Development Bank.
    5. Iva Tomic, 2020. "Employment protection reforms and labour market outcomes in the aftermath of the recession: Evidence from Croatia," Public Sector Economics, Institute of Public Finance, vol. 44(1), pages 3-39.
    6. Mauricio Tejada & Claudia Piras & Luca Flabbi & Monserrat Bustelo, 2021. "Gender Gaps in Latin American Labor Markets: Implications from an Estimated Search Model," Annals of Economics and Statistics, GENES, issue 142, pages 111-178.
    7. Makoto Masui, 2020. "The determinants of employers’ use of temporary contracts in the frictional labor market," Metroeconomica, Wiley Blackwell, vol. 71(4), pages 803-834, November.
    8. Lucas Navarro & Mauricio Tejada, 2022. "Does Public Sector Employment Buffer the Minimum Wage Effects?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 43, pages 168-196, January.
    9. repec:spo:wpmain:info:hdl:2441/2oi450ns2095rq83rilpo67bhb is not listed on IDEAS
    10. Gebauer Markus, 2023. "Job Protection — It is Good to be an Insider," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 13(1), pages 1-50, January.
    11. Takano, Tetsuaki, 2025. "Intensive and extensive margins of labor adjustment with non-regular employment," Journal of Macroeconomics, Elsevier, vol. 86(C).
    12. Bruno Coquet & Eric Heyer, 2018. "Pour une régulation économique des contrats courts sans contraindre les entreprises, en préservant l'assurance," Sciences Po Economics Publications (main) hal-03404222, HAL.
    13. Chiara Pollio & Fabio Landini & Elena Prodi & Alessandro Arrighetti, 2025. "Does temporary employment undermine the quality of permanent jobs? Evidence from the manufacturing industry," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 42(3), pages 703-743, October.

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    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • J4 - Labor and Demographic Economics - - Particular Labor Markets
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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