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Reforming Employment Protection Legislation in France

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  • Ms. Jianping Zhou

Abstract

Over the last 15 years, the reforms of employment protection legislation (EPL) in European countries have mainly eased hiring and firing restrictions for temporary employment while leaving the strict EPL provisions for regular or permanent contracts unchanged. Recent reforms in France follow this pattern. Using a search-matching model, we argue that this type of partial reform is inefficient: easing restrictions on temporary jobs fosters both job creation and job destruction, but strict EPL discourages both. The overall impact on equilibrium unemployment is thus ambiguous, depending on the characteristics of the specific labor market. Simulations of the model, calibrated for the French labor market, suggest that the job destruction effect is stronger, thus raising the unemployment rate.

Suggested Citation

  • Ms. Jianping Zhou, 2006. "Reforming Employment Protection Legislation in France," IMF Working Papers 2006/108, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2006/108
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    Cited by:

    1. Ms. Jianping Zhou, 2007. "Danish for All? Balancing Flexibility with Security: The Flexicurity Model," IMF Working Papers 2007/036, International Monetary Fund.
    2. Peng, Fei & Anwar, Sajid & Kang, Lili, 2017. "New technology and old institutions: An empirical analysis of the skill-biased demand for older workers in Europe," Economic Modelling, Elsevier, vol. 64(C), pages 1-19.
    3. Kazanas, Thanassis & Miaouli, Natasha, 2014. "Wage-setting and capital in unionized markets: Evidence from South Europe," Economic Modelling, Elsevier, vol. 37(C), pages 368-376.
    4. Mr. 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 2006/301, International Monetary Fund.
    5. O'Mahony, Mary & Robinson, Catherine & Vecchi, Michela, 2008. "The impact of ICT on the demand for skilled labour: A cross-country comparison," Labour Economics, Elsevier, vol. 15(6), pages 1435-1450, December.

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