The Impact of the 2012 Spanish Labour Market Reform on Unemployment Inflows and Outflows: a Regression Discontinuity Analysis using Duration Models

This paper studies the impact of the 2012 Spanish labour market reform on the probability of exiting and entering unemployment using a regression discontinuity approach based on duration models. The 2012 reform modified important aspects of hiring and dismissal procedures in Spain and, by doing that, affected the probability of exiting both unemployment and employment. Comparing labour market performance before and after February 2012 and using a competing risk duration model for the exit from both unemployment and employment, we find that the reform has helped employment creation in two ways. First, it has increased the likelihood of exiting from unemployment to employment. Secondly, it has reduced the probability of dismissal for workers on a temporary contract.