Flexibility at the margin and labor market volatility in OECD countries

Hector Sala, José Silva and Manuel Toledo

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: We argue that segmented labor markets with flexibility at the margin (e.g., just affecting fixed-term employees) may achieve similar volatility than fully deregulated labor markets. Flexibility at the margin produces a gap in separation costs among matched workers that cause fixed-term employment to be the main workforce adjustment device. Moreover, in the presence of limitations in the duration and number of renewals of fixed-term contracts, firms respond by fostering labor turnover which further raises the volatility of the labor market. We present a matching model with temporary and permanent jobs where (i) the gap in firing costs and (ii) restrictions in the use of fixedterm contracts play the central role to explain the similar volatility observed in many regulated labor markets with flexibility at the margin vis-à-vis the fully deregulated ones.

Keywords: Flexibility; at; the; margin; Volatility; Separation; costs; Matching; model (search for similar items in EconPapers)
JEL-codes: J23 J41 J63 (search for similar items in EconPapers)
Date: 2007-07
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 (10)

Downloads: (external link)
https://e-archivo.uc3m.es/rest/api/core/bitstreams ... 08c98b7975d1/content (application/pdf)

Related works:
Journal Article: Flexibility at the Margin and Labor Market Volatility in OECD Countries (2012)
Working Paper: Flexibility at the Margin and Labor Market Volatility in OECD Countries (2008)
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:cte:werepe:we075832

Access Statistics for this paper

More papers in UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía
Bibliographic data for series maintained by Ana Poveda ().