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

Yu-Fu Chen, Michael Funke

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    1 Citation (Scopus)

    Abstract

    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.
    Original languageEnglish
    Article number1679
    JournalStudies in Nonlinear Dynamics and Econometrics
    Volume13
    Issue number4
    DOIs
    Publication statusPublished - 9 Sep 2009

    Keywords

    • Labour demand
    • Dismissal protection legislation
    • Firing costs
    • Real options
    • Temporary work agencies
    • Temporary employment

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

    Chen, Y-F. & Funke, M., 2008, University of Dundee, (Dundee Discussion Papers in Economics; no. 207).

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