The Effects of Reducing Firing Costs in Spain: a Lost Opportunity?

Victoria Osuna

No E2004/18, Economic Working Papers at Centro de Estudios Andaluces from Centro de Estudios Andaluces

Abstract: In the mid 80.s, many European countries liberalized the use of fixed-term contracts in order to lower firm.s non-wage labor costs, instead of reducing firing costs associated with indefinite duration contracts. This policy generated segmented labor markets, being the Spanish case the most striking with a share of temporary employment of 33% by mid 90.s. Ever since, several reforms have been proposed and in this paper we quantify the effects of some of them. First, we build a model of job creation and destruction of the search and matching type that is able to replicate the main properties of a segmented labor market like the Spanish one. Then, we use this model to quantify the effects of eliminating procedural wages and further reducing firing costs associated with permanent contracts. The main results are: (i) a small increase on permanent job destruction, (ii) a significant reduction of temporary job destruction, mainly driven by the increase in job conversions from temporary contracts into permanent ones, and (iii) a significant reduction in labor market segmentation measured as the reduction in the wage gap of temporary versus permanent ones.

Keywords: Firing costs; Temporary Employment; Job destruction; Job conversions; Segmented labor markets; job creation. (search for similar items in EconPapers)
JEL-codes: E24 J23 J32 J42 J63 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2004
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://public.centrodeestudiosandaluces.es/pdfs/E200418.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to public.centrodeestudiosandaluces.es:80 (nodename nor servname provided, or not known)

Related works:
Journal Article: The Effects of Reducing Firing Costs in Spain: A Lost Opportunity? (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:cea:doctra:e2004_18

Access Statistics for this paper

More papers in Economic Working Papers at Centro de Estudios Andaluces from Centro de Estudios Andaluces c/ Bailén 50. 41001 Sevilla. Contact information at EDIRC.
Bibliographic data for series maintained by Susana Mérida ( this e-mail address is bad, please contact ).