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Financial incentives and labour market duality

Clémence Berson () and Nicolas Ferrari

Labour Economics, 2015, vol. 37, issue C, 77-92

Abstract: The French labour market is divided between workers in permanent jobs and those who alternate fixed-term contracts with unemployment spells. Among other public policies aiming at reducing this duality, financial incentives could induce employers to lengthen contract duration or favour permanent contracts. This article develops a matching model fitted to the French labour market characteristics and calibrated on French data. A gradual decrease in unemployment contributions or a firing tax reduces the share of short-term contract in total employment but increases market rigidity and lowers labour productivity. However, decreasing unemployment contributions gradually is less favourable for new entrants than a firing tax and lengthens unemployment spells. An additional contribution levied on short-term contracts to finance a bonus for permanent-contract hirings also decreases labour market duality and increases activity by 0.13% but without negative impacts on labour market flexibility and productivity.

Keywords: Temporary jobs; Duality; Public policies (search for similar items in EconPapers)
JEL-codes: J41 J42 J48 (search for similar items in EconPapers)
Date: 2015
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Working Paper: Financial incentives and labor market duality (2015) Downloads
Working Paper: Financial incentives and labor market duality (2014) Downloads
Working Paper: Financial incentives and labor market duality (2014) Downloads
Working Paper: Financial incentives and labor market duality (2014) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:37:y:2015:i:c:p:77-92

DOI: 10.1016/j.labeco.2015.10.001

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