IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Flexibility at the Margin and Labor Market Volatility in OECD Countries

  • Sala, Hector

    ()

    (Universitat Autònoma de Barcelona)

  • Silva, José I.

    ()

    (University of Kent)

  • Toledo, Manuel E.

    ()

    (Universidad Carlos III de Madrid)

We study whether segmented labor markets with flexibility at the margin (e.g., just affecting fixed-term employees) can achieve similar volatility than fully deregulated labor markets. Flexibility at the margin produces a gap in separation costs among matched workers that cause fixed-term employment to be the main workforce adjustment device, which in turn increases de labor market volatility. This increased volatility is partially reverted when limitations in the duration and number of renewals of fixed-term contracts are introduced. Under this scenario, firms respond by reducing the intensity of job destruction since it becomes more difficult to avoid firing costs in permanents contracts. We present a matching model with temporary and permanent jobs where (i) the gap in firing costs and (ii) restrictions in the use of fixed-term contracts helps explain the similar volatility observed in many regulated OECD labor markets with flexibility at the margin vis-à-vis the fully deregulated ones.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://ftp.iza.org/dp3293.pdf
Download Restriction: no

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3293.

as
in new window

Length: 25 pages
Date of creation: Jan 2008
Date of revision:
Publication status: published in: Scandinavian Journal of Economics, 2012, 114 (3), 991-1017
Handle: RePEc:iza:izadps:dp3293
Contact details of provider: Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org

Order Information: Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Tito Boeri & Pietro Garibaldi, 2007. "Two Tier Reforms of Employment Protection: a Honeymoon Effect?," Economic Journal, Royal Economic Society, vol. 117(521), pages 357-385, 06.
  2. Garibaldi, Pietro & Violante, Giovanni L, 2004. "The Employment Effects of Severance Payments with Wage Rigidities," CEPR Discussion Papers 4608, C.E.P.R. Discussion Papers.
  3. Walsh, Carl E., 2003. "Labor Market Search, Sticky Prices, and Interest Rate Policies," Santa Cruz Department of Economics, Working Paper Series qt6tg550dv, Department of Economics, UC Santa Cruz.
  4. Messina, Julián & Vallanti, Giovanna, 2006. "Job flow dynamics and firing restrictions: evidence from Europe," Working Paper Series 0602, European Central Bank.
  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. O Blanchard & A Landier, 2002. "The Perverse Effects of Partial Labour Market Reform: fixed--Term Contracts in France," Economic Journal, Royal Economic Society, vol. 112(480), pages F214-F244, June.
  7. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
  8. Dale T. Mortensen & Eva Nagypal, 2005. "More on Unemployment and Vacancy Fluctuations," NBER Working Papers 11692, National Bureau of Economic Research, Inc.
  9. Juan J Dolado & Carlos Garcia--Serrano & Juan F. Jimeno, 2002. "Drawing Lessons From The Boom Of Temporary Jobs In Spain," Economic Journal, Royal Economic Society, vol. 112(721), pages F270-F295, June.
  10. Garey Ramey & Wouter J. den Haan & Joel Watson, 2000. "Job Destruction and Propagation of Shocks," American Economic Review, American Economic Association, vol. 90(3), pages 482-498, June.
  11. P Garibaldi, 1995. "Job Flow Dynamics and Firing Restrictions," CEP Discussion Papers dp0256, Centre for Economic Performance, LSE.
  12. David H. Autor & William R. Kerr & Adriana D. Kugler, 2007. "Do Employment Protections Reduce Productivity? Evidence from U.S. States," Harvard Business School Working Papers 07-048, Harvard Business School.
  13. Burgess, Simon & Turon, Hélène, 2010. "Worker flows, job flows and unemployment in a matching model," European Economic Review, Elsevier, vol. 54(3), pages 393-408, April.
  14. Francesco Zanetti, 2006. "Labor Market Institutions and Aggregate Fluctuations in a Search and Matching Model," Computing in Economics and Finance 2006 445, Society for Computational Economics.
  15. Cahuc, Pierre & Postel-Vinay, Fabien, 2002. "Temporary jobs, employment protection and labor market performance," Labour Economics, Elsevier, vol. 9(1), pages 63-91, February.
  16. Jan Babecký & Philip Du Caju & Theodora Kosma & Martina Lawless & Julián Messina & Tairi Rõõm, 2010. "Downward nominal and real wage rigidity: survey evidence from European firms," Working Papers 110, Bank of Greece.
  17. Hernanz, Virginia & Jimeno, Juan F & Kugler, Adriana D., 2003. "Employment Consequences of Restrictive Permanent Contracts: Evidence from Spanish Labour Market Reforms," CEPR Discussion Papers 3724, C.E.P.R. Discussion Papers.
  18. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier.
  19. Wasmer, E., 1997. "Competition for Jobs in a Growing Economy and the Emergence of Dualism," DELTA Working Papers 97-13, DELTA (Ecole normale supérieure).
  20. Costain, James S. & Reiter, Michael, 2008. "Business cycles, unemployment insurance, and the calibration of matching models," Journal of Economic Dynamics and Control, Elsevier, vol. 32(4), pages 1120-1155, April.
  21. Azariadis, Costas & Pissarides, Christopher A., 2007. "Unemployment dynamics with international capital mobility," European Economic Review, Elsevier, vol. 51(1), pages 27-48, January.
  22. James Costain & Juan F. Jimeno & Carlos Thomas, 2010. "Employment fluctuations in a dual labor market," Banco de Espa�a Working Papers 1013, Banco de Espa�a.
  23. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July.
  24. 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.
  25. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  26. Marcus Hagedorn & Iourii Manovskii, 2008. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," American Economic Review, American Economic Association, vol. 98(4), pages 1692-1706, September.
  27. Cabrales, Antonio & Hopenhayn, Hugo A., 1997. "Labor-market flexibility and aggregate employment volatility," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 46(1), pages 189-228, June.
  28. Abowd, John M. & Kramarz, Francis, 2003. "The costs of hiring and separations," Labour Economics, Elsevier, vol. 10(5), pages 499-530, October.
  29. Victoria Osuna Padilla, 2004. "The Effects of Reducing Firing Costs in Spain: a Lost Opportunity?," Economic Working Papers at Centro de Estudios Andaluces E2004/18, Centro de Estudios Andaluces.
  30. Michael Elsby & Bart Hobijn & Aysegul Sahin, 2008. "Unemployment Dynamics in the OECD," NBER Working Papers 14617, National Bureau of Economic Research, Inc.
  31. Trigari, Antonella, 2004. "Equilibrium unemployment, job flows and inflation dynamics," Working Paper Series 0304, European Central Bank.
  32. David H. Autor & William R. Kerr & Adriana D. Kugler, 2007. "Does Employment Protection Reduce Productivity? Evidence From US States," Economic Journal, Royal Economic Society, vol. 117(521), pages 189-217, 06.
  33. Juan José Dolado & Carlos García-Serrano & Juan F. Jimeno, . "Drawing Lessons from the Boom of Temporary Jobs in Spain," Working Papers 2001-11, FEDEA.
  34. Silva, José Ignacio & Toledo, Manuel, 2009. "Labor Turnover Costs And The Cyclical Behavior Of Vacancies And Unemployment," Macroeconomic Dynamics, Cambridge University Press, vol. 13(S1), pages 76-96, May.
  35. Cecilia Albert & Carlos García-Serrano & Virginia Hernanz, 2004. "Firm-provided training and temporary contracts," Spanish Economic Review, Springer, vol. 7(1), pages 67-88, January.
  36. Assar Lindbeck & Dennis J. Snower, 1989. "The Insider-Outsider Theory of Employment and Unemployment," MIT Press Books, The MIT Press, edition 1, volume 1, number 026262074x, June.
  37. Marcelo Veracierto, 2008. "Firing Costs And Business Cycle Fluctuations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 1-39, 02.
  38. James H. Stock & Mark W. Watson, 2003. "Understanding Changes in International Business Cycle Dynamics," NBER Working Papers 9859, National Bureau of Economic Research, Inc.
  39. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  40. Victor Aguirregabiria & Cesar Alonso-Borrego, 2009. "Labor contracts and flexibility : evidence from a labor market reform in Spain," Economics Working Papers we091811, Universidad Carlos III, Departamento de Economía.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp3293. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.