Evaluating Labor Market Reforms: A General Equilibrium Approach

César Alonso-Borrego, Jesús Fernández-Villaverde () and José E. Galdón-Sánchez ()
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Jesús Fernández-Villaverde: Department of Economics, University of Pennsylvania
José E. Galdón-Sánchez: Department of Economics,Universidad Publica de Navarra
Authors registered in the RePEc Author Service: Jose Enrique Galdon-Sanchez () and Jesus Fernandez-Villaverde

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: Job security provisions are commonly invoked to explain the high and persistent European unemployment rates. This belief has led several countries to reform their labor markets and liberalize the use of fixed-term contracts. Despite how common such contracts have become after deregulation, there is a lack of quantitative analysis of their impact on the economy. To fill this gap, we build a general equilibrium model with heterogeneous agents and firing costs in the tradition of Hopenhayn and Rogerson (1993). We calibrate our model to Spanish data, choosing in part parameters estimated with firm-level longitudinal data. Spain is particularly interesting, since its labor regulations are among the most protective in the OECD, and both its unemployment and its share of fixed-term employment are the highest. We find that fixed term contracts increase unemployment, reduce output, and raise productivity. The welfare effects are ambiguous.

Keywords: Fixed-term contracts; Firing costs; General equilibrium; Heterogeneous agents (search for similar items in EconPapers)
JEL-codes: C68 E24 J30 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2004-04-24
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Related works:
Working Paper: Evaluating Labor Market Reforms: A General Equilibrium Approach (2005)
Working Paper: Evaluating labor market reforms: a general equilibrium approach (2004)
Working Paper: Evaluating Labor Market Reforms: A General Equilibrium Approach (2004)
Working Paper: Evaluating Labor Market Reforms: A General Equilibrium Approach (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:pen:papers:04-016

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