Employment Protection in Dual Labor Markets: Any Amplification of Macroeconomic Shocks?

Abstract: This paper studies the effects of labor market duality in terms of employment legislation protection (EPL) on labor market volatilities. Modeling contractual heterogeneity through a gap in EPL of temporary and permanent workers (weakly protected temporary/highly protected permanent contracts), I simulate both supply and demand shocks in a New Keynesian model with unemployment. I find that unemployment fluctuations follow an inverted U-shape over the magnitude of the EPL gap: small EPL gaps amplify, while large EPL gaps dampen the reaction of unemployment. In a subsequent empirical analysis, I find that the model’s predictions are consistent with panel data for a large set of OECD countries. Uncovering the non-linear course of unemployment volatility helps reconcile previous divergent research results.

Object Details

• Location: Deutsche Nationalbibliothek Frankfurt am Main
• Extent: Online-Ressource
• Language: Englisch

References and Relationships

• Bibliographic citation: Employment Protection in Dual Labor Markets: Any Amplification of Macroeconomic Shocks? ; volume:24 ; number:1 ; year:2023 ; pages:249-304 ; extent:56 ; The B.E. journal of macroeconomics ; 24, Heft 1 (2023), 249-304 (gesamt 56)

Contributors, Places and Time

• Creator: Lochner, Benjamin

Further information

• DOI: 10.1515/bejm-2023-0044
• URN: urn:nbn:de:101:1-2405011548381.981143129900
• Rights: Open Access; Der Zugriff auf das Objekt ist unbeschränkt möglich.
• Last update: 14.08.2025, 10:53 AM CEST