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Termination of Employment Contracts by Mutual Consent and Labor Market Fluidity

Author

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  • Cyprien Batut

    (Paris School of Economics)

  • Eric Maurin

    (Paris School of Economics)

Abstract

In many countries, the termination of employment contracts has to be either on employer initiative or on employee initiative. In 2008, the French government introduced a change in doctrine: it became possible to terminate employment contracts by mutual consent at a lower cost. We show that the reform was followed by a very significant increase of about 20% in outflow of permanent workers as well as by the replacement of around 10% of dismissals for cause by terminations by mutual consent. By promoting terminations by mutual consent, the reform has improved labor market fluidity and reduced the risks of labor disputes.

Suggested Citation

  • Cyprien Batut & Eric Maurin, 2020. "Termination of Employment Contracts by Mutual Consent and Labor Market Fluidity," IAAEU Discussion Papers 202005, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    • Handle: RePEc:iaa:dpaper:202005
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    References listed on IDEAS

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    Cited by:

    1. Paul Brandily & Camille Hémet & Clément Malgouyres, 2022. "Understanding the Reallocation of Displaced Workers to Firms," PSE Working Papers halshs-03082302, HAL.

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    More about this item

    Keywords

    employment termination; dismissal; quit; labor litigation; severance payment;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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