The Perverse Effects of Partial Labour Market Reform: Fixed-Term Contracts in France

31 Pages Posted: 22 Dec 2002

See all articles by Olivier J. Blanchard

Olivier J. Blanchard

National Bureau of Economic Research (NBER); Peter G. Peterson Institute for International Economics

Augustin Landier

HEC

Abstract

We argue that the effects of a partial reform of employment protection by allowing firms to hire workers on fixed-term contracts may be perverse. The main effect may be high turnover in entry-level jobs, leading to higher, not lower, unemployment. Even if unemployment falls, workers may be worse off, going through many spells of unemployment and entry-level jobs, before obtaining a regular job. Considering French data for young workers since the early 1980s, we conclude that the reforms have substantially increased turnover, without a substantial reduction in unemployment duration. If anything, the effect on their welfare appears to have been negative.

Suggested Citation

Blanchard, Olivier J. and Landier, Augustin, The Perverse Effects of Partial Labour Market Reform: Fixed-Term Contracts in France. Economic Journal, Vol. 112, pp. F189-F213, 2002. Available at SSRN: https://ssrn.com/abstract=316901

Olivier J. Blanchard (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Augustin Landier

HEC ( email )

France
+33630006051 (Phone)

HOME PAGE: http://https://sites.google.com/site/augustinlandier/

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