Arbeitspapier
Employment Consequences of Restrictive Permanent Contracts: Evidence from Spanish Labor Market Reforms
Temporary employment contracts allowing unrestricted dismissals were introduced in Spain in 1984 and quickly came to account for most new jobs. As a result, temporary employment increased from around 10% in the mid-eighties to more than 30% in the early nineties. In 1997, however, the Spanish government attempted to reduce the incidence of temporary employment by reducing payroll taxes and dismissal costs for permanent contracts. In this paper, we use individual data from the Spanish Labor Force Survey to estimate the effects of reduced payroll taxes and dismissal costs on the distribution of employment and worker flows. We exploit the fact that recent reforms apply only to certain demographic groups to set up a natural experiment research design that can be used to study the effects of contract regulations. Our results show that the reduction of payroll taxes and dismissal costs increased the employment of young workers on permanent contracts. Results for older workers show insignificant effects. The results suggest a reasonably elastic response of permanent employment to nonwage labor costs for young workers. We also find positive effects on the transitions from unemployment and temporary employment into permanent employment for young and older workers, although the effects for older workers are not always significant. On the other hand, transitions from permanent employment to nonemployment increased only for older men, suggesting that the reform had little effect on dismissals.
- Language
-
Englisch
- Bibliographic citation
-
Series: IZA Discussion Papers ; No. 657
- Classification
-
Wirtschaft
Labor Demand
Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
Wages, Compensation, and Labor Costs: Public Policy
Labor Turnover; Vacancies; Layoffs
Unemployment Insurance; Severance Pay; Plant Closings
- Subject
-
temporary employment
dismissal costs
payroll taxes
European unemployment
Arbeitsmarktflexibilisierung
Personalzusatzkosten
Kündigungsschutz
Befristeter Arbeitsvertrag
Beschäftigungseffekt
Schätzung
Spanien
- Event
-
Geistige Schöpfung
- (who)
-
Kugler, Adriana D.
Jimeno, Juan F.
Hernanz, Virginia
- Event
-
Veröffentlichung
- (who)
-
Institute for the Study of Labor (IZA)
- (where)
-
Bonn
- (when)
-
2003
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Kugler, Adriana D.
- Jimeno, Juan F.
- Hernanz, Virginia
- Institute for the Study of Labor (IZA)
Time of origin
- 2003
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