Financial incentives and labor market duality

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

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

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: Duality; public policies (search for similar items in EconPapers)
JEL-codes: J41 J42 J48 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2014-07
New Economics Papers: this item is included in nep-iue, nep-lab and nep-lma
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ftp://mse.univ-paris1.fr/pub/mse/CES2014/14061.pdf (application/pdf)

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:mse:cesdoc:14061

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