TY  - JOUR
AU  - Blanchard,Olivier
AU  - Landier,Augustin
TI  - The Perverse Effects of Partial Labor Market Reform: Fixed Duration Contracts in France
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8219
PY  - 2001
Y2  - April 2001
UR  - http://www.nber.org/papers/w8219
L1  - http://www.nber.org/papers/w8219.pdf
N1  - Author contact info:
Olivier J. Blanchard
International Monetary Fund
Economic Counsellor and Director
Research Department
700 19th Street, NW
Rm. 10-700
Washington DC, 20431
Tel: 202-623-7825
Fax: 202-623-7271
E-Mail: blanchar@mit.edu

Augustin Landier
the Toulouse School of Economics
21 Allée de Brienne
31000 Toulouse, FRANCE
E-Mail: augustin.landier@tse-fr.eu
AB  - Rather than decrease firing costs across the board, a number of European countries have allowed firms to hire workers on fixed-duration contracts. At the end of a given duration, these contracts can be terminated at little or no cost. If workers are kept on however, the contracts become subject to regular firing costs.  We argue in this paper that the effects of such a partial reform of employment protection may be perverse. The main effect may be high turnover in fixed-duration jobs, leading in turn to higher, not lower, unemployment. And, even if unemployment comes down, workers may actually be worse off, going through many spells of unemployment and fixed duration jobs, before obtaining a regular job. Looking at 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, their effect on welfare of young workers appears to have been negative.
ER  -