Fixed-term Contracts and Unemployment: an Efficiency Wage Analysis

Maia Güell
Authors registered in the RePEc Author Service: Maia Güell ()

No 18, Working Papers from Barcelona School of Economics

Abstract: I analyze the effects of introducing fixed-term contracts, leaving existing labor market regulations unchanged, on unemployment and labor market segmentation. I use an efficiency wage model in which the firm's choice of contracts and the renewal rate of fixed-term contracts into permanent ones are endogenous. The renewal rate of fixed-term contracts is lower the higher the firing costs of permanent contracts are. Introducing fixed-term contracts can imply higher unemployment even in a world where reducing firing costs would reduce it. Moreover, when the two-tier system does not generate higher employment compared to the system with only permanent contracts, the segmentation of the labor market is socially too large.

Keywords: unemployment; fixed-term and permanent contracts; renewal rate; efficiency wage (search for similar items in EconPapers)
JEL-codes: J41 J42 J63 (search for similar items in EconPapers)
Date: 2015-09
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Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Fixed-Term Contracts and Unemployment: An Efficiency Wage Analysis (2000)
Working Paper: Fixed-term contracts and unemployment: an efficiency wage analysis (2000)
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