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The Shortcomings of a Partial Release of Employment Protection Laws; The Case of the 2005 French Reform

  • Pierre Cahuc
  • Stéphane Carcillo

This paper proposes an ex ante evaluation of the effects of new labor contracts such as the "Contrat Nouvelle Embauche" (CNE) introduced in France in 2005. The lessons we draw are of sufficiently general interest to be applicable to other countries or reforms of employment protection laws. Using a model that captures the characteristics of the French labor market, we simulate the effects of this reform on unemployment, employment, and welfare. We estimate that the CNE will lead to the creation of 70,000 additional jobs in the long run, but at the cost of a slight deterioration in welfare.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/301.

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Length: 40
Date of creation: 01 Dec 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/301
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  1. Kramarz, Francis & Michaud, Marie-Laure, 2004. "The Shape of Hiring and Separation Costs," IZA Discussion Papers 1170, Institute for the Study of Labor (IZA).
  2. 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).
  3. Cahuc, Pierre & Malherbet, Franck, 2004. "Unemployment compensation finance and labor market rigidity," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 481-501, March.
  4. Dominique Goux & Eric Maurin & Marianne Pauchet, 1999. "Fixed-term Contracts and the Dynamics of Labour Demand," Working Papers 99-02, Centre de Recherche en Economie et Statistique.
  5. Bernard Salanié & Guy Laroque, 2000. "Une décomposition du non-emploi en France," Économie et Statistique, Programme National Persée, vol. 331(1), pages 47-66.
  6. 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.
  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. Jian-Ping Zhou, 2006. "Reforming Employment Protection Legislation in France," IMF Working Papers 06/108, International Monetary Fund.
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