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General Equilibrium Evaluation of Temporary Employment

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  • Yang, Guanyi

Abstract

This paper studies the response of firms in an environment with heightened idiosyncratic risk and dual labor markets, a regular market with firing rigidity and a frictionless temporary labor market. I find that firing rigidity induces firms to switch from regular employment to temporary employment, and heightened risks amplify such behavior. Efficiency and welfare loss from friction and risk, though alleviated by a small extent, cannot be fully compensated by having temporary employment. This study also first extends the literature of temporary employment by examining its impact in the U.S. labor market.

Suggested Citation

  • Yang, Guanyi, 2017. "General Equilibrium Evaluation of Temporary Employment," MPRA Paper 80047, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:80047
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    File URL: https://mpra.ub.uni-muenchen.de/80047/1/MPRA_paper_80047.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Labor market misallocation; temporary employment; firing costs; idiosyncratic uncertainty; general equilibrium; heterogeneous agents;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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