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Flexibility at the margin and labour market volatility: The case of Spain

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Author Info
Héctor Sala (Universitat Autònoma de Barcelona)
José I. Silva (Universitat Jaume I de Castelló)

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Abstract

The Spanish labour market is a prominent case of segmentation with flexibility at the margin (e.g., just a􀀞ecting fixed-term employees). Flexibility at the margin produces a gap in separation costs between temporary and permanent workers which causes fixed-term contracts to be the main workforce adjustment device. It also leads to a productivity gap, due to high turnover and lack of on-the-job training of temporary employees. To explain the high volatility of the Spanish labour market we develop a matching model with temporary and permanent employees where these gaps play a central role. This model is calibrated and simulated to match the stylised facts and assess the cyclical implications of the 1984 and 1997 labour market reforms.

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Publisher Info
Article provided by Fundación SEPI in its journal Investigaciones Económicas.

Volume (Year): 33 (2009)
Issue (Month): 2 (May)
Pages: 145-178
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:iec:inveco:v:33:y:2009:i:2:p:145-178

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Postal: Investigaciones Economicas Fundación SEPI Quintana, 2 (planta 3) 28008 Madrid Spain
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Related research
Keywords: flexibility at the margin; labour market volatility; firing costs; labour productivity; matching.;

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Find related papers by JEL classification:
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
J63 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Turnover; Vacancies; Layoffs

References listed on IDEAS
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