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From Dual to Unified Employment Protection: Transition and Steady State

Author

Listed:
  • Dolado, Juan J.

    (Universidad Carlos III de Madrid)

  • Lalé, Etienne

    (York University, Canada)

  • Siassi, Nawid

    (University of Konstanz)

Abstract
This paper analyses the optimal design of a single open-ended contract (SOEC) and studies the political economy of moving towards such a SOEC in a labour market where employment protection is highly discontinuous. We develop a computationally tractable approach to compare two economic environments: one with a large employment protection gap after a short tenure, and another one with a SOEC featuring a smooth tenure profile. For illustrative purposes, we specialise the discussion of such choices to Spain, a country often considered as an epitome of a labour market with dual employment protection. We show that a SOEC has the potential of bringing substantial improvements in equilibrium allocations and welfare. We provide estimates for the eligibility rule and tenure profile of the optimal SOEC, defined as the contract maximising the steady-state lifetime utility of new labour-market entrants. Finally, we use the model to identify winners and losers among younger and older workers in the transitional path of such a reform, and evaluate its political support.

Suggested Citation

  • Dolado, Juan J. & Lalé, Etienne & Siassi, Nawid, 2016. "From Dual to Unified Employment Protection: Transition and Steady State," IZA Discussion Papers 9953, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp9953
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Boeri, Tito & Garibaldi, Pietro, 2019. "A tale of comprehensive labor market reforms: Evidence from the Italian jobs act," Labour Economics, Elsevier, vol. 59(C), pages 33-48.
    2. Samuel Bentolila & Juan Jose Dolado & Juan F. Jimeno, 2019. "Dual Labour Markets Revisited," CESifo Working Paper Series 7479, CESifo.
    3. Johanna Schauer, 2018. "Labor Market Duality in Korea," IMF Working Papers 2018/126, International Monetary Fund.
    4. Pierre Cahuc & Olivier Charlot & Franck Malherbet & Helène Benghalem & Emeline Limon, 2020. "Taxation of Temporary Jobs: Good Intentions with Bad Outcomes?," The Economic Journal, Royal Economic Society, vol. 130(626), pages 422-445.
    5. Cahuc, Pierre & Malherbet, Franck & Prat, Julien, 2019. "The Detrimental Effect of Job Protection on Employment: Evidence from France," IZA Discussion Papers 12384, Institute of Labor Economics (IZA).
    6. Juan J. Dolado & Etienne Lalé & Nawid Siassi, 2021. "From dual to unified employment protection: Transition and steady state," Quantitative Economics, Econometric Society, vol. 12(2), pages 547-585, May.
    7. Juan J. Dolado & Florentino Felgueroso & Juan F. Jimeno, 2021. "Past, present and future of the Spanish labour market: when the pandemic meets the megatrends," Applied Economic Analysis, Emerald Group Publishing Limited, vol. 29(85), pages 21-41, January.
    8. Sahin Avcioglu & Bilgehan Karabay, 2020. "Labor market regulation under self‐enforcing contracts," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(6), pages 1965-2018, December.
    9. Dolado, Juan J & Jimeno, Juan Francisco, 2020. "The Spanish Labour Market at the Crossroads: Covid†19 meets the Megatrends," CEPR Discussion Papers 15452, C.E.P.R. Discussion Papers.
    10. Cristina Lafuente, 2018. "Search capital and Unemployment Duration," 2018 Meeting Papers 427, Society for Economic Dynamics.
    11. Etienne Lale, 2019. "Labor-market Frictions, Incomplete Insurance and Severance Payments," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 31, pages 411-435, January.
    12. Jonathan Créchet, 2023. "Risk Sharing in a Dual Labor Market," Working Papers 2307E, University of Ottawa, Department of Economics.
    13. Rasmus Wiese & Joåo Tovar Jalles & Jakob de Haan & João Tovar Jalles, 2024. "Labour Market Counter-Reforms in OECD Countries: Conditional Impact on Output and Employment Growth," CESifo Working Paper Series 11199, CESifo.
    14. Cristina Lafuente, 2017. "Search capital and Unemployment Duration (Preliminary)," Edinburgh School of Economics Discussion Paper Series 283, Edinburgh School of Economics, University of Edinburgh.

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    More about this item

    Keywords

    dualism; employment protection; single contract; labour market reform;
    All these keywords.

    JEL classification:

    • H29 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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