TY  - JOUR
AU  - Alonso-Borrego,César
AU  - Fernández-Villaverde,Jesús
AU  - Galdón-Sánchez,José E.
TI  - Evaluating Labor Market Reforms: A General Equilibrium Approach
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11519
PY  - 2005
Y2  - August 2005
UR  - http://www.nber.org/papers/w11519
L1  - http://www.nber.org/papers/w11519.pdf
N1  - Author contact info:
Cesar Alonso-Borrego
E-Mail: cesar.alonso@uc3m.es

Jesus Fernandez-Villaverde
University of Pennsylvania
160 McNeil Building
3718 Locust Walk
Philadelphia, PA 19104
Tel: 267/307-1068
E-Mail: jesusfv@econ.upenn.edu

Jose Galdon-Sanchez
Dept. of Economics
Universidad Publica de Navarra
Campus Arrosadia
31006 - Pamplona SPAIN
E-Mail: jose.galdon@unavarra.es
M2  - featured in NBER digest on 2005-08-01
AB  - Job security provisions are commonly invoked to explain the high and persistent European unemployment rates. This belief has led several countries to reform their labor markets and liberalize the use of fixed-term contracts. Despite how common such contracts have become after deregulation, there is a lack of quantitative analysis of their impact on the economy. To fill this gap, we build a general equilibrium model with heterogeneous agents and firing costs in the tradition of Hopenhayn and Rogerson (1993). We calibrate our model to Spanish data, choosing in part parameters estimated with firm-level longitudinal data. Spain is particularly interesting, since its labor regulations are among the most protective in the OECD, and both its unemployment and its share of fixed-term employment are the highest. We find that fixed-term contracts increase unemployment, reduce output, and raise productivity. The welfare effects are ambiguous.
ER  -