Dual labor markets and the macroeconomyMarchés du travail duaux et macroéconomieNormann Rion
PSE-Ecole d'économie de Paris (Postprint) from HAL Abstract: Despite a strict law regarding the use of atypical contracts, fixed-term employment has been expanding in Western Europe over the last decades. My dissertation studies the macroeconomic implications of this expansion. Academics assert that high firing costs account for it. However, most papers consider steady-state responses of the labor market to changes in firing costs and overlook transitions. In my first chapter, I bridge that gap and model a dual labor market as an extension of the classic Mortensen-Pissarides model. Firing costs protect open-ended contracts, whereas fixed-term contracts have a given average duration and costlessly end at expiry. New firm-worker pairs choose the contract that maximizes their joint surpluses. I calibrate the model on French data and find that transitions to a unique contract equilibrium with lower firing costs take a long time, reduce open-ended employment and increase non-employment. In my second chapter, I study fluctuations in a dual labor market with a quite similar model plugged in a typical New-Keynesian framework. As employment protection impacts the resort to fixed-term contracts, it impacts the way firms optimize their pricing decisions in response to shocks. I also look how changing firing costs alters inflation dynamics. I calibrate and estimate the model on Euro area quarterly time series data using a Sequential Monte Carlo method. The model replicates well labor market moments. I find that inflation volatility does not respond to changes in firing cost, whereas the dynamics of inflation components are deeply altered. Using a third-order perturbation method and introducing stochastic volatility, I find that fixed-term employment may enable to tell apart uncertainty and negative demand shocks. My third chapter focuses on the modeling of job creation in matching models. I review the literature and categorize papers regarding their modeling of fixed-term contracts. Fixed-term contracts may be considered as flexible - they may split anytime at zero cost - or rigid - they cannot split before their stipulated expiry date. A trade-off arises between robustness and being able to account for contractual substitution at the hiring stage. Job creation tends to occur through fixed-term contracts only, when they are flexible. Thus, many papers resort to ad hoc} hiring rules that direct a settled share of new matches towards open-ended contracts, which shut down contractual substitution effects in job creation. On the contrary, rigid fixed-term contracts lead to dual job creation, but the ranking of contracts in job creation lacks robustness. Keywords: Firing costs; Dualism; Fixed-term contracts; Macroeconomics; Coûts de licenciement; Dualisme; CDD; Macroéconomie (search for similar items in EconPapers) Published in Economics and Finance. Université Paris sciences et lettres, 2020. English. ⟨NNT : 2020UPSLE079⟩ Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:tel-03681524 Access Statistics for this paper More papers in PSE-Ecole d'économie de Paris (Postprint) from HAL |
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