Fixed-term employment contracts in an equilibrium search model

Fernando Alvarez and Marcelo Veracierto

Journal of Economic Theory, 2012, vol. 147, issue 5, 1725-1753

Abstract: We develop a theoretical model of firm dynamics and unemployment and characterize equilibria with tenure dependent separation taxes. The model is a version of the Lucas and Prescott island model with undirected search. Two equivalent decentralizations are considered: one with spot labor markets and one with long-term employment relations. We model “temporary contracts” as the special case of a separation tax that only applies to workers with tenure higher than J. While in principle these contracts require a J-dimensional state space, equilibrium allocations solve a simple dynamic programming problem characterized by two-dimensional inaction set(s).

Keywords: Temporary contracts; Fixed-term contracts; Firing costs; Search; Unemployment (search for similar items in EconPapers)
JEL-codes: J62 J63 J64 J65 J68 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022053112000695
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Fixed-Term Employment Contracts in an Equilibrium Search Model (2006)
Working Paper: Fixed term employment contracts in an equilibrium search model (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:147:y:2012:i:5:p:1725-1753

DOI: 10.1016/j.jet.2012.05.015

Access Statistics for this article

Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell

More articles in Journal of Economic Theory from Elsevier
Bibliographic data for series maintained by Catherine Liu ().