Dundee Discussion Papers in Economics 207: Threshold effects of dismissal protection regulation and the emergence of temporary work agencies

TY - UNPB

T1 - Dundee Discussion Papers in Economics 207

T2 - Threshold effects of dismissal protection regulation and the emergence of temporary work agencies

AU - Chen, Yu-Fu

AU - Funke, Michael

N1 - This paper was also published by Berkeley Electronic Press in Studies in Nonlinear Dynamics & Econometrics, Vol. 13 (4), Article 3

PY - 2008

Y1 - 2008

N2 - Labour market regulations aimed at enhancing job-security are dominant in several OECD countries. These regulations seek to reduce dismissals of workers and fluctuations in employment. The main theoretical contribution is to gauge the effects of such regulations on labour demand across establishment sizes. In order to achieve this, we investigate an optimising model of labour demand under uncertainty through the application of real option theory. We also consider other forms of employment which increase the flexibility of the labour market. In particular, we are modelling the contribution of temporary employment agencies (Zeitarbeit) allowing for quick personnel adjustments in client firms. The calibration results indicate that labour market rigidities may be crucial for understanding sluggishness in firms´ labour demand and the emergence and growth of temporary work.

AB - Labour market regulations aimed at enhancing job-security are dominant in several OECD countries. These regulations seek to reduce dismissals of workers and fluctuations in employment. The main theoretical contribution is to gauge the effects of such regulations on labour demand across establishment sizes. In order to achieve this, we investigate an optimising model of labour demand under uncertainty through the application of real option theory. We also consider other forms of employment which increase the flexibility of the labour market. In particular, we are modelling the contribution of temporary employment agencies (Zeitarbeit) allowing for quick personnel adjustments in client firms. The calibration results indicate that labour market rigidities may be crucial for understanding sluggishness in firms´ labour demand and the emergence and growth of temporary work.

KW - Labour demand

KW - Dismissal protection legislation

KW - Firing costs

KW - Real options

KW - Temporary work agencies

KW - Temporary employment

M3 - Discussion paper

T3 - Dundee Discussion Papers in Economics

BT - Dundee Discussion Papers in Economics 207

PB - University of Dundee

ER -