Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/hal-03125344.html
   My bibliography  Save this paper

Job creation in a dual labor market: a constructivist approach

Author

Listed:
  • Normann Rion

    (UM - Le Mans Université, CEPREMAP - Centre pour la recherche économique et ses applications - ECO ENS-PSL - Département d'économie de l'ENS-PSL - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres)

Abstract
In this paper, I review matching models of dual labor markets from a theoretical point of view and describe the consequences of the most common sets of assumptions on job creation. I assert that two poles arise in the literature depending on the modeling of fixed-term contracts. Some papers assume that fixed-term contracts are flexible in the sense that firm-worker matches may costlessly separate any time. Others assume that a fixed-term match is rigid and cannot split before reaching its stipulated termination date, regardless the undergone shocks. Modeling fixed-term contracts as utterly flexible tends to make fixed-term contracts the only vehicle of job creation, while open-ended contracts only appear as converted expiring fixed-term contracts. This counter-factual result encourages the use of ad hoc hiring rules that ensure that job creation involves both contracts. On the contrary, modeling fixed-term contracts as rigid makes fixed-term contracts less attractive and leaves more room for job creation to involve open-ended contracts. Substitution effects between contracts can be considered in these frameworks. I build up a model with rigid fixed-term contracts and heterogeneous productivity of matches assumption by assumption and find major robustness issues. Introducing the convertibility of fixed-term contracts into open-ended ones flips over the ranking of contracts at the hiring stage with respect to productivity. Enabling matches to optimize the average duration of fixed-term contracts leads to highly counter-factual results: the shortest and the least productive fixed-term matches have the highest probabilities to be converted to open-ended contracts. The highlighted robustness issues and counter-factual predictions contaminate recent papers studying labor market dualism and heterogeneity in workload fluctuations.

Suggested Citation

  • Normann Rion, 2021. "Job creation in a dual labor market: a constructivist approach," Working Papers hal-03125344, HAL.
    • Handle: RePEc:hal:wpaper:hal-03125344
    Note: View the original document on HAL open archive server: https://hal.science/hal-03125344
    as

    Download full text from publisher

    File URL: https://hal.science/hal-03125344/document
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nickell, Stephen, 1979. "Unemployment and the structure of labor costs," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 11(1), pages 187-222, January.
    2. Normann Rion, 2020. "Fluctuations in a Dual Labor Market," PSE Working Papers halshs-02570540, HAL.
    3. repec:eee:labchp:v:1:y:1986:i:c:p:473-522 is not listed on IDEAS
    4. Shutao Cao & Enchuan Shao & Pedro Silos, 2010. "Fixed-term and permanent employment contracts: theory and evidence," FRB Atlanta Working Paper 2010-13, Federal Reserve Bank of Atlanta.
    5. O. Ashenfelter & D. Card (ed.), 2011. "Handbook of Labor Economics," Handbook of Labor Economics, Elsevier, edition 1, volume 4, number 4.
    6. Cahuc, Pierre & Postel-Vinay, Fabien, 2002. "Temporary jobs, employment protection and labor market performance," Labour Economics, Elsevier, vol. 9(1), pages 63-91, February.
    7. Pierre Cahuc & Olivier Charlot & Franck Malherbet, 2016. "Explaining The Spread Of Temporary Jobs And Its Impact On Labor Turnover," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57(2), pages 533-572, May.
    8. O. Ashenfelter & D. Card (ed.), 2011. "Handbook of Labor Economics," Handbook of Labor Economics, Elsevier, edition 1, volume 4, number 5.
    9. Normann Rion, 2019. "Waiting for the Prince Charming: Fixed-Term Contracts as Stopgaps," Working Papers halshs-02331887, HAL.
    10. Samuel Bentolila & Giuseppe Bertola, 1990. "Firing Costs and Labour Demand: How Bad is Eurosclerosis?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(3), pages 381-402.
    11. Bentolila, Samuel & Dolado, Juan J. & Jimeno, Juan F., 2019. "Dual Labour Markets Revisited," IZA Discussion Papers 12126, Institute of Labor Economics (IZA).
    12. Hector Sala & José I. Silva & Manuel Toledo, 2012. "Flexibility at the Margin and Labor Market Volatility in OECD Countries," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(3), pages 991-1017, September.
    13. Bertola, Giuseppe, 1992. "Labor Turnover Costs and Average Labor Demand," Journal of Labor Economics, University of Chicago Press, vol. 10(4), pages 389-411, October.
    14. Fabio Berton & Pietro Garibaldi, 2012. "Workers and Firms Sorting into Temporary Jobs," Economic Journal, Royal Economic Society, vol. 122(562), pages 125-154, August.
    15. Risager, Ole & Sorensen, Jan Rose, 1997. "On the effects of firing costs when investment is endogenous: An extension of a model by Bertola," European Economic Review, Elsevier, vol. 41(7), pages 1343-1353, July.
    16. Robert Shimer, 2012. "Reassessing the Ins and Outs of Unemployment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(2), pages 127-148, April.
    17. Boeri, Tito, 2011. "Institutional Reforms and Dualism in European Labor Markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 13, pages 1173-1236, Elsevier.
    18. Juan J Dolado & Carlos Garcia--Serrano & Juan F. Jimeno, 2002. "Drawing Lessons From The Boom Of Temporary Jobs In Spain," Economic Journal, Royal Economic Society, vol. 112(721), pages 270-295, June.
    19. Héctor Sala & José I. Silva, 2009. "Flexibility at the margin and labour market volatility: The case of Spain," Investigaciones Economicas, Fundación SEPI, vol. 33(2), pages 145-178, May.
    20. Samuel Bentolila & Pierre Cahuc & Juan J. Dolado & Thomas Le Barbanchon, 2012. "Two‐Tier Labour Markets in the Great Recession: France Versus Spain-super-," Economic Journal, Royal Economic Society, vol. 122(562), pages 155-187, August.
    21. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    22. James Costain & Juan F. Jimeno & Carlos Thomas, 2010. "Employment fluctuations in a dual labour market," Economic Bulletin, Banco de España, issue APR, pages 129-137, April.
    23. O Blanchard & A Landier, 2002. "The Perverse Effects of Partial Labour Market Reform: fixed--Term Contracts in France," Economic Journal, Royal Economic Society, vol. 112(480), pages 214-244, June.
    24. Pierre Cahuc & Olivier Charlot & Franck Malherbet, 2016. "Explaining The Spread Of Temporary Jobs And Its Impact On Labor Turnover," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57, pages 533-572, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bentolila, Samuel & Dolado, Juan J. & Jimeno, Juan F., 2019. "Dual Labour Markets Revisited," IZA Discussion Papers 12126, Institute of Labor Economics (IZA).
    2. Normann Rion, 2019. "Waiting for the Prince Charming: Fixed-Term Contracts as Stopgaps," PSE Working Papers halshs-02331887, HAL.
    3. Charlot, Olivier & Malherbet, Franck, 2013. "Education and employment protection," Labour Economics, Elsevier, vol. 20(C), pages 3-23.
    4. Samuel Bentolila & Juan Dolado & Juan Jimeno, 2012. "Reforming an insider-outsider labor market: the Spanish experience," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 1(1), pages 1-29, December.
    5. 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.
    6. Normann Rion, 2020. "Fluctuations in a Dual Labor Market," PSE Working Papers halshs-02570540, HAL.
    7. Jonathan Créchet, 2023. "Risk Sharing in a Dual Labor Market," Working Papers 2307E, University of Ottawa, Department of Economics.
    8. Pierre Cahuc & Olivier Charlot & Franck Malherbet, 2016. "Explaining The Spread Of Temporary Jobs And Its Impact On Labor Turnover," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57(2), pages 533-572, May.
    9. Iva Tomic, 2020. "Employment protection reforms and labour market outcomes in the aftermath of the recession: Evidence from Croatia," Public Sector Economics, Institute of Public Finance, vol. 44(1), pages 3-39.
    10. 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.
    11. Lochner Benjamin, 2024. "Employment Protection in Dual Labor Markets: Any Amplification of Macroeconomic Shocks?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 24(1), pages 249-304, January.
    12. Le Barbanchon, Thomas. & Malherbet, Franck., 2013. "An anatomy of the French labour market : country case studies on labour market segmentation," ILO Working Papers 994814973402676, International Labour Organization.
    13. Makoto Masui, 2020. "The determinants of employers’ use of temporary contracts in the frictional labor market," Metroeconomica, Wiley Blackwell, vol. 71(4), pages 803-834, November.
    14. repec:ilo:ilowps:481497 is not listed on IDEAS
    15. Garcia-Louzao, Jose & Hospido, Laura & Ruggieri, Alessandro, 2023. "Dual returns to experience," Labour Economics, Elsevier, vol. 80(C).
    16. 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.
    17. Marco Di Cintio & Emanuele Grassi, 2015. "Wage Incentive Profiles in Dual Labour Markets," Economica, London School of Economics and Political Science, vol. 82(328), pages 790-812, October.
    18. Diego Daruich & Sabrina Di Addario & Raffaele Saggio, 2023. "The Effects of Partial Employment Protection Reforms: Evidence from Italy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(6), pages 2880-2942.
    19. Bassanini, Andrea & Caroli, Eve & Fontaine, François & Rebérioux, Antoine, 2021. "Escaping social pressure: Fixed-term contracts in multi-establishment firms," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 697-715.
    20. Hector Sala & José I. Silva & Manuel Toledo, 2012. "Flexibility at the Margin and Labor Market Volatility in OECD Countries," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(3), pages 991-1017, September.
    21. Olivier Charlot & Idriss Fontaine & Thepthida Sopraseut, 2019. "Employment Fluctuations, Job Polarization and Non-Standard Work: Evidence from France and the US," TEPP Working Paper 2019-07, TEPP.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-03125344. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.