IDEAS home Printed from https://ideas.repec.org/p/bde/wpaper/0510.html
   My bibliography  Save this paper

Dual employment protection legislation: a framework for analysis

Author

Listed:
  • Juan J. Dolado

    () (Universidad Carlos III de Madrid)

  • Marcel Jansen

    () (Universidad Carlos III de Madrid)

  • Juan F. Jimeno

    () (Banco de España)

Abstract

In many countries, Employment Protection Legislation (EPL) establishes different regulations for certain groups of workers who face more disadvantages in the labor market (young workers, women, unskilled workers, etc.) with the aim of improving their employability. Well known examples are the introduction of atypical employment contracts (e.g., temporary and determined duration contracts) which ease firing restrictions for some, but not all, workers. This paper discusses the effects of EPL varying among workers of different skills on the level and composition of unemployment, job flows, productivity and welfare. By using an extension of Mortensen Pissarides' (1994) search model where heterogeneous workers compete for the same jobs, we are able to identify several key channels through which changing firing costs for some groups of workers affects hiring and firing of all workers and, hence, may have a different impact on aggregate labor market variables than reducing firing costs across the board. Some analytical and simulation results also show that these effects of differentiated firing costs by workers' skills may be different depending upon the initial state of the labor market.

Suggested Citation

  • Juan J. Dolado & Marcel Jansen & Juan F. Jimeno, 2005. "Dual employment protection legislation: a framework for analysis," Working Papers 0510, Banco de España;Working Papers Homepage.
  • Handle: RePEc:bde:wpaper:0510
    as

    Download full text from publisher

    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/05/Fic/dt0510e.pdf
    File Function: First version, May 2005
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Morgan, Julian & Locarno, Alberto & Vallés, Javier & Berben, Robert-Paul, 2004. "Cross-country differences in monetary policy transmission," Working Paper Series 400, European Central Bank.
    2. Camacho Maximo & Perez Quiros Gabriel, 2007. "Jump-and-Rest Effect of U.S. Business Cycles," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 11(4), pages 1-39, December.
    3. David Neumark & William Wascher, 2004. "Minimum Wages, Labor Market Institutions, and Youth Employment: A Cross-National Analysis," ILR Review, Cornell University, ILR School, vol. 57(2), pages 223-248, January.
    4. Canova, Fabio & Ciccarelli, Matteo & Ortega, Eva, 2007. "Similarities and convergence in G-7 cycles," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 850-878, April.
    5. Adriana Kugler & Juan F. Jimeno & Virginia Hernanz, "undated". "Employment Consequences of Restrictive Permanent Contracts: Evidence from Spanish Labor Market Reforms," Working Papers 2003-14, FEDEA.
    6. Acemoglu, D, 1996. "Good Jobs Versus Bad Jobs : Theory and Some Evidence," Working papers 96-33, Massachusetts Institute of Technology (MIT), Department of Economics.
    7. Garey Ramey & Wouter J. den Haan & Joel Watson, 2000. "Job Destruction and Propagation of Shocks," American Economic Review, American Economic Association, vol. 90(3), pages 482-498, June.
    8. Belot, M.V.K. & Boone, J. & van Ours, J.C., 2002. "Welfare Effects of Employment Protection," Discussion Paper 2002-48, Tilburg University, Center for Economic Research.
    9. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    10. JuanJ. Dolado & Marcel Jansen & JuanF. Jimeno, 2009. "On-the-Job Search in a Matching Model with Heterogeneous Jobs and Workers," Economic Journal, Royal Economic Society, vol. 119(534), pages 200-228, January.
    11. Boeri, Tito & Jimeno, Juan F., 2005. "The effects of employment protection: Learning from variable enforcement," European Economic Review, Elsevier, vol. 49(8), pages 2057-2077, November.
    12. Cahuc, Pierre & Postel-Vinay, Fabien, 2002. "Temporary jobs, employment protection and labor market performance," Labour Economics, Elsevier, vol. 9(1), pages 63-91, February.
    13. Alison L Booth & Juan J. Dolado & Jeff Frank, 2002. "Symposium On Temporary Work Introduction," Economic Journal, Royal Economic Society, vol. 112(480), pages 181-188, June.
    14. Ana Buisán & Juan Carlos Caballero & José Manuel Campa & Noelia Jiménez, 2004. "La importancia de la histéresis en las exportaciones de manufacturas de los países de la UEM," Monetaria, Centro de Estudios Monetarios Latinoamericanos, vol. 0(2), pages 169-222, abril-jun.
    15. Lars Ljungqvist, 2002. "How Do Lay--off Costs Affect Employment?," Economic Journal, Royal Economic Society, vol. 112(482), pages 829-853, October.
    16. James Albrecht & Susan Vroman, 2002. "A Matching Model with Endogenous Skill Requirements," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 283-305, February.
    17. 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.
    18. Hugo A. Hopenhayn, 2001. "Labor Market Policies and Employment Duration: The Effects of Labor Market Reform in Argentina," Research Department Publications 3106, Inter-American Development Bank, Research Department.
    19. Burda, Michael C, 1992. " A Note on Firing Costs and Severance Benefits in Equilibrium Unemployment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(3), pages 479-489.
    20. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
    21. Giuseppe Bertola & Francine Blau & Lawrence Kahn, 2007. "Labor market institutions and demographic employment patterns," Journal of Population Economics, Springer;European Society for Population Economics, vol. 20(4), pages 833-867, October.
    22. Juan J. Dolado & Marcel Jansen & Juan F. Jimeno, 2005. "Dual employment protection legislation: a framework for analysis," Working Papers 0510, Banco de España;Working Papers Homepage.
    23. Juan F. Jimeno & Diego Rodríguez-Palenzuela, "undated". "Youth unemployment in the OECD: Demographic shifts, labour market institutions, and macroeconomic shocks," Working Papers 2002-15, FEDEA.
    24. Dreze, Jacques H. & Malinvaud, Edmond, 1994. "Growth and employment: The scope of a European initiative," European Economic Review, Elsevier, vol. 38(3-4), pages 489-504, April.
    25. Andrés, Javier & López-Salido, J David & Nelson, Edward, 2004. "Tobin's Imperfect Asset Substitution in Optimizing General Equilibrium," CEPR Discussion Papers 4336, C.E.P.R. Discussion Papers.
    26. 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.
    27. Olivier Blanchard & Augustin Landier, 2001. "The Perverse Effects of Partial Labor Market Reform: Fixed Duration Contracts in France," NBER Working Papers 8219, National Bureau of Economic Research, Inc.
    28. Frank Dietrich & Hartmut Kliemt & Michael Imhoff, 2002. "Introduction," Homo Oeconomicus, Institute of SocioEconomics, vol. 19, pages 7-8.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Maravall, Agustin, 2006. "An application of the TRAMO-SEATS automatic procedure; direct versus indirect adjustment," Computational Statistics & Data Analysis, Elsevier, vol. 50(9), pages 2167-2190, May.
    2. José Ignacio García Pérez & Yolanda Rebollo Sanz, 2005. "The use of permanent and temporary jobs across Spanish regions: Do unit labour cost differentials offer an explanation?," Economic Working Papers at Centro de Estudios Andaluces E2005/16, Centro de Estudios Andaluces.
    3. Arnaud Dupuy & Daniel Fernandez-Kranz, 2011. "International differences in the family gap in pay: the role of labour market institutions," Applied Economics, Taylor & Francis Journals, vol. 43(4), pages 413-438.
    4. Ana del Río & Garry Young, 2005. "The impact of unsecured debt on financial distress among British households," Working Papers 0512, Banco de España;Working Papers Homepage.
    5. Jianping Zhou, 2006. "Reforming Employment Protection Legislation in France," IMF Working Papers 06/108, International Monetary Fund.
    6. Wesselbaum, Dennis, 2016. "The Intensive Margin Puzzle And Labor Market Adjustment Costs," Macroeconomic Dynamics, Cambridge University Press, vol. 20(06), pages 1458-1476, September.
    7. Juan J. Dolado & Marcel Jansen & Juan F. Jimeno, 2005. "Dual employment protection legislation: a framework for analysis," Working Papers 0510, Banco de España;Working Papers Homepage.
    8. James Albrecht & Lucas Navarro & Susan Vroman, 2009. "The Effects of Labour Market Policies in an Economy with an Informal Sector," Economic Journal, Royal Economic Society, vol. 119(539), pages 1105-1129, July.
    9. Luis J. Álvarez & Emmanuel Dhyne & Marco Hoeberichts & Claudia Kwapil & Hervé Le Bihan & Patrick Lünnemann & Fernando Martins & Roberto Sabbatini & Harald Stahl & Philip Vermeulen & Jouko Vilmunen, 2006. "Sticky Prices in the Euro Area: A Summary of New Micro-Evidence," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 575-584, 04-05.
    10. Arce, Oscar & López-Salido, J David, 2006. "House Prices, Rents and Interest Rates Under Collateral Constraints," CEPR Discussion Papers 5689, C.E.P.R. Discussion Papers.
    11. Dolado Juan & Jansen Marcel & Jimeno Serrano Juan, 2007. "A Positive Analysis of Targeted Employment Protection Legislation," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-30, July.
    12. Hernández de Cos, Pablo & de Castro Fernández, Francisco, 2006. "The economic effects of exogenous fiscal shocks in Spain: a SVAR approach," Working Paper Series 647, European Central Bank.
    13. Gabriel Jiménez & Vicente Salas-Fumás & Jesús Saurina, 2006. "Credit market competition, collateral and firms' finance," Working Papers 0612, Banco de España;Working Papers Homepage.
    14. Wesselbaum, Dennis, 2014. "How Large are Firing Costs? A Cross-Country Study," MPRA Paper 58762, University Library of Munich, Germany.
    15. Dennis Wesselbaum, 2015. "Firing costs in a business cycle model with endogenous separations," Journal of Economic Studies, Emerald Group Publishing, vol. 42(3), pages 499-518, August.
    16. Julián Messina & Giovanna Vallanti, 2007. "Job Flow Dynamics and Firing Restrictions: Evidence from Europe," Economic Journal, Royal Economic Society, vol. 117(521), pages 279-301, June.
    17. Wesselbaum, Dennis, 2009. "Firing costs in a New Keynesian model with endogenous separations," Kiel Working Papers 1550, Kiel Institute for the World Economy (IfW).
    18. Luis J. Álvarez & Pablo Burriel & Ignacio Hernando, 2010. "Price-setting behaviour in Spain: evidence from micro PPI data," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(2-3), pages 105-121.
    19. Ana del Río & Garry Young, 2005. "The determinants of unsecured borrowing: evidence from the British household panel survey," Working Papers 0511, Banco de España;Working Papers Homepage.
    20. Cano-Urbina, Javier, 2015. "The role of the informal sector in the early careers of less-educated workers," Journal of Development Economics, Elsevier, vol. 112(C), pages 33-55.
    21. Adela Luque, 2005. "Skill mix and technology in Spain: evidence from firm level data," Working Papers 0513, Banco de España;Working Papers Homepage.
    22. Ahrens, Steffen & Wesselbaum, Dennis, 2009. "On the introduction of firing costs," Kiel Working Papers 1559, Kiel Institute for the World Economy (IfW).
    23. repec:ilo:ilowps:433276 is not listed on IDEAS
    24. Paloma López-García & Sergio Puente, 2006. "Business demography in Spain: determinants of firm survival," Working Papers 0608, Banco de España;Working Papers Homepage.

    More about this item

    Keywords

    firing costs; matching; unemployment;

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bde:wpaper:0510. 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: (María Beiro. Electronic Dissemination of Information Unit. Research Department. Banco de España). General contact details of provider: http://www.bde.es/ .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.