Date: 2015
Type: Working Paper
Moving towards a single labour contract : transition vs. steady-state
Working Paper, CEPR Discussion Paper, 2015/11030
DOLADO, Juan J., LALÉ, Etienne, SIASSI, Nawid, Moving towards a single labour contract : transition vs. steady-state, CEPR Discussion Paper, 2015/11030 - https://hdl.handle.net/1814/38986
Retrieved from Cadmus, EUI Research Repository
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 with dual employment protection. We develop a computationally tractable approach to compare two economic environments: one with flexible entry-level jobs and high employment protection at longer tenures, and another one with a SOEC featuring employment protection levels that increase smoothly with tenure. For illustrative purposes, we specialise the discussion of such choices to Spain, a country often considered as an epitome of a dual labour market. 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.
Additional information:
Published: December 2015
Cadmus permanent link: https://hdl.handle.net/1814/38986
ISSN: 0265-8003
Series/Number: CEPR Discussion Paper; 2015/11030
Keyword(s): Dualism Employment protection Labour market reform Single contract H29 J33 J65
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