Financial incentives and labor market duality

Clémence Berson and Nicolas Ferrari
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Nicolas Ferrari: Direction Générale du Trésor

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Abstract: The French labor 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 favor permanent contracts. This article develops a matching model fitted to the French labor-market characteristics and calibrated on French data. A gradual decrease in unemployment contributions or a firing tax reduces the duality but increases market rigidity and lowers labor productivity. However, decreasing unemployment contributions gradually is less favorable 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 labor-market duality and increases activity but without negative impacts on labor-market flexibility and productivity.

Keywords: public policies; duality; politiques publiques; segmentation (search for similar items in EconPapers)
Date: 2014-07
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01110663v1
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Published in 2014

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Related works:
Journal Article: Financial incentives and labour market duality (2015)
Working Paper: Financial incentives and labor market duality (2015)
Working Paper: Financial incentives and labor market duality (2014)
Working Paper: Financial incentives and labor market duality (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01110663

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