From Dual to Unified Employment Protection: Transition and Steady State

44 Pages Posted: 13 Dec 2015 Last revised: 17 Jan 2018

See all articles by Juan Jose Dolado

Juan Jose Dolado

Universidad Carlos III de Madrid - Department of Economics; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Etienne Lalé

University of Quebec at Montreal (UQAM) - Université du Québec à Montréal; CIRANO; IZA

Nawid Siassi

University of Konstanz - Faculty of Economics and Statistics

Multiple version iconThere are 3 versions of this paper

Date Written: January 1, 2018

Abstract

We develop a computationally tractable model to study the allocational and distributional consequences of replacing a highly dual employment protection legislation (EPL) system with a unified EPL scheme. To illustrate our approach, we specialise the discussion to Spain – a country considered as an epitome of a labour market with dual EPL. First, we show that introducing a unified EPL scheme reduces unemployment and worker turnover at short job tenures. However, these changes are quantitatively limited as most of the adjustments occur through a change in bargained wages. Second, as a consequence, the policy reform has very heterogeneous effects on the lifetime value and on the volatility of labour income. The results support the view that replacing dual EPL with a unified scheme creates winners and losers among workers who are employed when the reform is implemented.

Keywords: Employment Protection; Dualism; Labour Market Reform

JEL Classification: E24, J63, J65

Suggested Citation

Dolado, Juan Jose and Lalé, Etienne and Siassi, Nawid, From Dual to Unified Employment Protection: Transition and Steady State (January 1, 2018). Available at SSRN: https://ssrn.com/abstract=2702404 or http://dx.doi.org/10.2139/ssrn.2702404

Juan Jose Dolado

Universidad Carlos III de Madrid - Department of Economics ( email )

Calle Madrid 126
Getafe, 28903
Spain
+34 91 624 9300 (Phone)
+34 91 624 9313 (Fax)

HOME PAGE: http://www.eco.uc3m.es/english/staff/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Etienne Lalé (Contact Author)

University of Quebec at Montreal (UQAM) - Université du Québec à Montréal ( email )

CP 8888 Succ Centre Ville
Montréal, Québec H3C3P8
Canada

CIRANO ( email )

2020 rue University, 25th floor
Montreal H3C 3J7, Quebec
Canada

IZA ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Nawid Siassi

University of Konstanz - Faculty of Economics and Statistics ( email )

Universitaetsstr. 10
78457 Konstanz
Germany

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