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Explaining the Spread of Temporary Jobs and its Impact on Labor Turnover

  • Cahuc, Pierre
  • Charlot, Olivier
  • Malherbet, Franck

This paper provides a simple model which explains the choice between permanent and temporary jobs. This model, which incorporates important features of actual employment protection legislations neglected by the economic literature so far, reproduces the main stylized facts about entries into permanent and temporary jobs observed in Continental European countries. We show that the stringency of legal constraints on the termination of permanent jobs has a strong positive impact on the turnover of temporary jobs. We also find that job protection has very small effects on total employment but induces large substitution of temporary jobs for permanent jobs which significantly reduces aggregate production.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8864.

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Date of creation: Mar 2012
Date of revision:
Handle: RePEc:cpr:ceprdp:8864
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  1. Bentolila, Samuel & Cahuc, Pierre & Dolado, Juan J. & Le Barbanchon, Thomas, 2010. "Two-Tier Labor Markets in the Great Recession: France vs. Spain," IZA Discussion Papers 5340, Institute for the Study of Labor (IZA).
  2. Andrea Caggese & Vicente Cuñat, 2008. "Financing Constraints and Fixed-term Employment Contracts," Economic Journal, Royal Economic Society, vol. 118(533), pages 2013-2046, November.
  3. Alonso-Borrego, César & Fernández-Villaverde, Jesús & Galdon-Sanchez, Jose Enrique, 2004. "Evaluating Labor Market Reforms: A General Equilibrium Approach," IZA Discussion Papers 1129, Institute for the Study of Labor (IZA).
  4. Tito Boeri & Pietro Garibaldi, 2007. "Two Tier Reforms of Employment Protection: a Honeymoon Effect?," Economic Journal, Royal Economic Society, vol. 117(521), pages 357-385, 06.
  5. Petrongolo, Barbara & Pissarides, Christopher, 2000. "Looking Into The Black Box: A Survey Of The Matching Function," CEPR Discussion Papers 2409, C.E.P.R. Discussion Papers.
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  7. Mário Centeno & Álvaro A. Novo, 2012. "Excess worker turnover and fixed-term contracts: Causal evidence in a two-tier system," Working Papers w201205, Banco de Portugal, Economics and Research Department.
  8. 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).
  9. Anne Bucher, 2010. "Hiring Practices, Employment Protection and Temporary Jobs," TEPP Working Paper 2010-13, TEPP.
  10. Bassanini, Andrea & Garnero, Andrea, 2012. "Dismissal Protection and Worker Flows in OECD Countries: Evidence from Cross-Country/Cross-Industry Data," IZA Discussion Papers 6535, Institute for the Study of Labor (IZA).
  11. 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.
  12. Olivier L'Haridon & Franck Malherbet, 2008. "Employment Protection Reform in Search Economies," THEMA Working Papers 2008-26, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  13. Ch. Pissarides., 2011. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 1.
  14. Fabio Berton & Pietro Garibladi, 2006. "Workers and Firms Sorting into Temporary Jobs," LABORatorio R. Revelli Working Papers Series 51, LABORatorio R. Revelli, Centre for Employment Studies.
  15. Inés Macho-Stadler & David Pérez-Castrillo & and Nicolés Porteiro, 2011. "Optimal Coexistence of Long-Term and Short-Term Contracts in Labor Markets," Working Papers 557, Barcelona Graduate School of Economics.
  16. José Varejão & Pedro Portugal, 2003. "Why Do Firms Use Fixed-Term Contracts?," CEF.UP Working Papers 0310, Universidade do Porto, Faculdade de Economia do Porto.
  17. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
  18. Shutao Cao & Enchuan Shao & Pedro Silos, 2010. "Fixed-term and permanent employment contracts: theory and evidence," FRB Atlanta Working Paper 2010-13, Federal Reserve Bank of Atlanta.
  19. Cappellari, Lorenzo & Dell’Aringa, Carlo & Leonardi, Marco, 2012. "Temporary Employment, Job Flows and Productivity: A Tale of Two Reforms," IZA Discussion Papers 6526, Institute for the Study of Labor (IZA).
  20. Gilles Saint Paul, 1999. "The political economy of employment protection," Economics Working Papers 355, Department of Economics and Business, Universitat Pompeu Fabra.
  21. Danielle Venn, 2009. "Legislation, Collective Bargaining and Enforcement: Updating the OECD Employment Protection Indicators," OECD Social, Employment and Migration Working Papers 89, OECD Publishing.
  22. repec:oup:restud:v:61:y:1994:i:3:p:397-415 is not listed on IDEAS
  23. Dräger, Vanessa & Marx, Paul, 2012. "Do Firms Demand Temporary Workers When They Face Workload Fluctuation? Cross-Country Firm-Level Evidence on the Conditioning Effect of Employment Protection," IZA Discussion Papers 6894, Institute for the Study of Labor (IZA).
  24. repec:oup:qjecon:v:105:y:1990:i:3:p:699-726 is not listed on IDEAS
  25. Le Barbanchon, Thomas & Malherbet, Franck, 2013. "An anatomy of the French labour market : country case studies on labour market segmentation," ILO Working Papers 481497, International Labour Organization.
  26. James Costain & Juan F. Jimeno & Carlos Thomas, 2010. "Employment fluctuations in a dual labor market," Banco de Espa�a Working Papers 1013, Banco de Espa�a.
  27. repec:oup:qjecon:v:116:y:2001:i:4:p:1409-1448 is not listed on IDEAS
  28. Samuel Bentolila & Juan Jose Dolado & Juan F. Jimeno, 2008. "Two-tier Employment Protection Reforms: The Spanish Experience," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 6(4), pages 49-56, December.
  29. 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).
  30. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  31. 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.
  32. David H. Autor, 2003. "Outsourcing at Will: The Contribution of Unjust Dismissal Doctrine to the Growth of Employment Outsourcing," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 1-42, January.
  33. Bentolila, Samuel & Saint-Paul, Gilles, 1992. "The macroeconomic impact of flexible labor contracts, with an application to Spain," European Economic Review, Elsevier, vol. 36(5), pages 1013-1047, June.
  34. Kahn, Lawrence M., 2010. "Employment protection reforms, employment and the incidence of temporary jobs in Europe: 1996-2001," Labour Economics, Elsevier, vol. 17(1), pages 1-15, January.
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