The Relevance of Post-Match LTC: Why Has the Spanish Labor Market Become as Volatile as the US One?

Hector Sala and José Silva

No 1823, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We present a Search and Matching model with heterogeneous workers (entrants and incumbents) that replicates the stylized facts characterizing the US and the Spanish labor markets. Under this benchmark, we find the Post-Match Labor Turnover Costs (PMLTC) to be the centerpiece to explain why the Spanish labor market is as volatile as the US one. The two driving forces governing this volatility are the gaps between entrants and incumbents in terms of separation costs and productivity. We use the model to analyze the cyclical implications of changes in labor market institutions affecting these two gaps. The scenario with a low degree of workers’ heterogeneity illustrates its suitability to understand why the Spanish labor market has become as volatile as the US one.

Keywords: firing costs; training; matching; search; productivity differentials (search for similar items in EconPapers)
JEL-codes: J23 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2005-10
New Economics Papers: this item is included in nep-dge, nep-eec and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published - fully revised version published in: Investigaciones Económicas, 2009, 33 (2), 145-178

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Working Paper: The relevance of Post-Match LTC: Why has the Spanish labor market become as volatile as the US one? (2005)
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