Labor Contracts and Flexibility: Evidence from a Labor Market Reform in Spain
This paper evaluates the effects on employment, job turnover and productivity of a labor market reform in Spain that eliminated dismissal costs for fixed-term or temporary contracts. Our empirical results are based on a panel of 2356 Spanish manufacturing firms for the period 1982-1993. We postulate and estimate a dynamic labor demand model with indefinite and fixed-term labor contracts, and a general structure of labor adjustment costs. Experiments using the estimated model show important positive effects of the reform on total employment (i.e., a 3.5% increase) and job turnover. There is a strong substitution of permanent by temporary workers (i.e., a 10% decline in permanent employment). The effects on labor productivity and the value of a firm are very small. These effects contrast with the ones of a counterfactual reform consisting in halving firing costs of all type of contracts. That policy implies the same increase in total employment, but much larger improvements in productivity, and the value of firms.
|Date of creation:||11 Feb 2009|
|Date of revision:|
|Contact details of provider:|| Postal: 150 St. George Street, Toronto, Ontario|
Phone: (416) 978-5283
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.:
- Hunt, Jennifer, 2000.
"Firing Costs, Employment Fluctuations and Average Employment: An Examination of Germany,"
London School of Economics and Political Science, vol. 67(266), pages 177-202, May.
- Jennifer Hunt, 1994. "Firing Costs, Employment Fluctuations and Average Employment: An Examination of Germany," NBER Working Papers 4825, National Bureau of Economic Research, Inc.
- Gerard A. Pfann & Franz C. Palm, 1993.
"Asymmetric Adjustment Costs in Non-linear Labour Demand Models for the Netherlands and U.K. Manufacturing Sectors,"
Review of Economic Studies,
Oxford University Press, vol. 60(2), pages 397-412.
- PFANN, Gerard & PALM, Franz, 1992. "Asymmetric adjustment costs in non-linear labour demand models for the Netherlands and UK manufacturing sectors," CORE Discussion Papers 1992017, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- PFANN, Gerard A. & PALM, Franz C., . "Asymmetric adjustment costs in non-linear labour demand models for the Netherlands and U.K. manufacturing sectors," CORE Discussion Papers RP 1044, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Olley, G Steven & Pakes, Ariel, 1996.
"The Dynamics of Productivity in the Telecommunications Equipment Industry,"
Econometric Society, vol. 64(6), pages 1263-97, November.
- G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc.
- George S Olley & Ariel Pakes, 1992. "The Dynamics Of Productivity In The Telecommunications Equipment Industry," Working Papers 92-2, Center for Economic Studies, U.S. Census Bureau.
- Hansen, Lars Peter & Singleton, Kenneth J, 1982. "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 50(5), pages 1269-86, September.
- Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
- Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October.
- Newey, Whitney K., 1984. "A method of moments interpretation of sequential estimators," Economics Letters, Elsevier, vol. 14(2-3), pages 201-206.
When requesting a correction, please mention this item's handle: RePEc:tor:tecipa:tecipa-346. 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: (RePEc Maintainer)
If references are entirely missing, you can add them using this form.