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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. Bruno Coquet & Eric Heyer, 2018. "Pour une régulation économique des contrats courts sans contraindre les entreprises, en préservant l'assurance," Sciences Po publications info:hdl:2441/2oi450ns209, Sciences Po.
    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. Tejada, Mauricio & Piras, Claudia & Flabbi, Luca & Bustelo, Monserrat, 2021. "Gender Gaps in Latin American Labor Markets: Implications from an Estimated Search Model," IZA Discussion Papers 14186, Institute of Labor Economics (IZA).
    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, . "Does Public Sector Employment Buffer the Minimum Wage Effects?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics.

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    More about this item

    Keywords

    Temporary jobs; Labor protection; Search models; Maximum likelihood estimation; Structural estimation;
    All these keywords.

    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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