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Unemployment and Temporary Jobs in the Crisis: Comparing France and Spain

  • Samuel Bentolila
  • Pierre Cahuc
  • Juan José Dolado
  • Thomas Le Barbanchon, .

Our goal here is to explain the strikingly different response of Spanish unemployment relative to other European economies, in particular France, during the ongoing recession. The Spanish unemployment rate, which fell from 22% in 1994 to 8% in 2007, reached 19% by the end of 2009, whereas the French unemployment rate has only increased by less than 2 pp. during the crisis. We argue that labor market institutions in the two economies are rather similar, except for the larger gap between dismissal costs of workers with permanent and temporary contracts in Spain, which lead to huge flows of temporary workers out of and into unemployment. We estimate in a counterfactual scenario that more than one-half of the increase in the unemployment rate would have been avoided had Spain adopted French employment protection institutions before the recession started.

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Paper provided by FEDEA in its series Working Papers with number 2010-07.

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Date of creation: Feb 2010
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Handle: RePEc:fda:fdaddt:2010-07
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  1. Hector Sala & José I. Silva & Manuel Toledo, 2012. "Flexibility at the Margin and Labor Market Volatility in OECD Countries," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(3), pages 991-1017, 09.
  2. Kramarz, Francis & Philippon, Thomas, 2001. "The impact of differential payroll tax subsidies on minimum wage employment," Journal of Public Economics, Elsevier, vol. 82(1), pages 115-146, October.
  3. 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.
  4. Samuel Bentolila & Juan F. Jimeno, 2003. "Spanish Unemployment: The End of the Wild Ride?," CESifo Working Paper Series 940, CESifo Group Munich.
  5. Bentolila, Samuel & Cahuc, Pierre & Dolado, Juan J. & Le Barbanchon, Thomas, 2010. "Two-Tier Labor Markets in the Great Recession: France vs. Spain," CEPR Discussion Papers 8152, C.E.P.R. Discussion Papers.
  6. Bassanini, Andrea & Nunziata, Luca & Venn, Danielle, 2008. "Job Protection Legislation and Productivity Growth in OECD Countries," IZA Discussion Papers 3555, Institute for the Study of Labor (IZA).
  7. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  8. Malcomson, J., 1998. "Individual employment contracts," Discussion Paper Series In Economics And Econometrics 9804, Economics Division, School of Social Sciences, University of Southampton.
  9. Andrea Ichino & Regina T. Riphahn, 2001. "The Effect of Employment Protection on Worker Effort. A Comparison of Absenteeism During and After Probation," CESifo Working Paper Series 596, CESifo Group Munich.
  10. Samuel Bentolila & Juan J. Dolado & Juan F. Jimeno, 2008. "Does immigration affect the Phillips curve? Some evidence for Spain," Banco de Espa�a Working Papers 0814, Banco de Espa�a.
  11. Cahuc, Pierre & Postel-Vinay, Fabien, 2001. "Temporary Jobs, Employment Protection and Labor Market Performance," IZA Discussion Papers 260, Institute for the Study of Labor (IZA).
  12. Saint-Paul, Gilles, 2000. "The Political Economy of Labour Market Institutions," OUP Catalogue, Oxford University Press, number 9780198293323, March.
  13. 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.
  14. Pierre Cahuc & Stéphane Carcillo, 2006. "The Shortcomings of a Partial Release of Employment Protection Laws; The Case of the 2005 French Reform," IMF Working Papers 06/301, International Monetary Fund.
  15. 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.
  16. 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.
  17. Yolanda Rebollo Sanz & J. Ignacio García-Pérez, 2009. "Do wage subsidies affect the subsequent employment stability of permanent workers?: the case of Spain," Working Papers 09.18, Universidad Pablo de Olavide, Department of Economics.
  18. Lars Ljungqvist, 2002. "How Do Lay--off Costs Affect Employment?," Economic Journal, Royal Economic Society, vol. 112(482), pages 829-853, October.
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