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A Positive Analysis of Targeted Employment Protection Legislation

Author

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  • Dolado, Juan J.

    () (European University Institute)

  • Jansen, Marcel

    () (Universidad Autónoma de Madrid)

  • Jimeno, Juan F.

    () (Bank of Spain)

Abstract

In many countries, Employment Protection Legislation (EPL) establishes less strict dismissal procedures for specific groups of workers. This paper builds a simple matching model with heterogeneous workers in order to analyze this feature of EPL. We use the model to analyze the effects of reforms targeted at lowering the firing costs of a particular group of workers, and compare the results with those stemming from a comprehensive reform that reduces firing costs for all workers. The model is calibrated for the Spanish economy, where an important reform of this kind took place in 1997. Overall, our results point out that EPL reforms achieve the largest reduction in unemployment when they are targeted to workers with lower and more volatile productivity.

Suggested Citation

  • Dolado, Juan J. & Jansen, Marcel & Jimeno, Juan F., 2007. "A Positive Analysis of Targeted Employment Protection Legislation," IZA Discussion Papers 2679, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp2679
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    References listed on IDEAS

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    Cited by:

    1. Andrea Bassanini & Luca Nunziata & Danielle Venn, 2009. "Job protection legislation and productivity growth in OECD countries," Economic Policy, CEPR;CES;MSH, vol. 24, pages 349-402, April.
    2. Fernández-Kranz, Daniel & Rodríguez-Planas, Núria, 2011. "The part-time pay penalty in a segmented labor market," Labour Economics, Elsevier, vol. 18(5), pages 591-606, October.
    3. Núria Rodríguez-Planas & Natalia Nollenberger, 2016. "Labor market integration of new immigrants in Spain," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-15, December.
    4. James Albrecht & Lucas Navarro & Susan Vroman, 2009. "The Effects of Labour Market Policies in an Economy with an Informal Sector," Economic Journal, Royal Economic Society, vol. 119(539), pages 1105-1129, July.
    5. Susan Vroman & Lucas Navarro & James Albrecht, 2011. "Public Sector Employment in an Equilibrium Search and Matching Model," 2011 Meeting Papers 390, Society for Economic Dynamics.
    6. Marco Leonardi & Giovanni Pica, 2013. "Who Pays for it? The Heterogeneous Wage Effects of Employment Protection Legislation," Economic Journal, Royal Economic Society, vol. 123(12), pages 1236-1278, December.
    7. Samuel Bentolila & Juan Jose Dolado & Juan F. Jimeno, 2008. "Two-tier Employment Protection Reforms: The Spanish Experience," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 6(4), pages 49-56, December.
    8. Kameliia Petrova, 2016. "Entrepreneurship And The Informal Economy: An Empirical Analysis," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 21(02), pages 1-21, June.
    9. Cervini-Plá, María & Ramos, Xavier & Ignacio Silva, José, 2014. "Wage effects of non-wage labour costs," European Economic Review, Elsevier, vol. 72(C), pages 113-137.
    10. Pedro Gete and Paolo Porchia, 2011. "A Real Options Analysis of Dual Labor Markets and the Single Labor Contract," Working Papers gueconwpa~11-11-02, Georgetown University, Department of Economics.
    11. Wesselbaum, Dennis, 2014. "How Large are Firing Costs? A Cross-Country Study," MPRA Paper 58762, University Library of Munich, Germany.
    12. Dennis Wesselbaum, 2015. "Firing costs in a business cycle model with endogenous separations," Journal of Economic Studies, Emerald Group Publishing, vol. 42(3), pages 499-518, August.
    13. Fernández-Kranz Daniel & Aitor Lacuesta & Núria Rodríguez-Planas, 2013. "The Motherhood Earnings Dip: Evidence from Administrative Records," Journal of Human Resources, University of Wisconsin Press, vol. 48(1), pages 169-197.
    14. Wesselbaum, Dennis, 2009. "Firing costs in a New Keynesian model with endogenous separations," Kiel Working Papers 1550, Kiel Institute for the World Economy (IfW).
    15. Chiara BROCCOLINI & Marco LILLA & Stefano STAFFOLANI, 2010. "A Search Model in a Segmented Labour Market: the Odd Role of Unions," Working Papers 349, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    16. Héctor Sala & José I. Silva, 2009. "Flexibility at the margin and labour market volatility: The case of Spain," Investigaciones Economicas, Fundación SEPI, vol. 33(2), pages 145-178, May.
    17. Ahrens, Steffen & Wesselbaum, Dennis, 2009. "On the introduction of firing costs," Kiel Working Papers 1559, Kiel Institute for the World Economy (IfW).
    18. José Silva & Javier Vázquez-Grenno, 2011. "The ins and outs of unemployment and the assimilation of recent immigrants in Spain," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(4), pages 1309-1330, October.
    19. Moser, Christoph & Stähler, Nikolai, 2009. "Spillover effects of minimum wages in a two-sector search model," Discussion Paper Series 1: Economic Studies 2009,01, Deutsche Bundesbank.

    More about this item

    Keywords

    firing costs; unemployment; matching;

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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