Quality of Employment and Employment Protection. Effects of Employment Protection on Temporary and Permanent Employment

For mainstream economics, rigidities in the labour market are a key determinant of the labour market results in terms of employment and unemployment. Thus, mainstream economics recommends full flexibility in the labour markets. Following these prescriptions, most European countries have introduced labour market reforms that have affected affect the conditions to hire and fire permanent workers and the constraints to the use of temporary employment contracts. However, the empirical evidence clearly shows that a conclusion about the impact of labour market reforms on total employment cannot be reached. Indeed, recent empirical evidence, argues that a higher flexibility in the employment protection has a negative impact on employment. This implies that a higher labour flexibility is associated with a higher labour segmentation, characterized by a rising share of temporary workers but not with a higher total employment