Fixed term employment contracts in an equilibrium search model
By: Fernando Alvarez, Marcelo Veracierto
Contributors: Veracierto, Marcelo; Federal Reserve Bank of Chicago. Research Department
Series: Working paper series -- WP-2005-14; Working paper series (Federal Reserve Bank of Chicago. Research Department : Online) -- WP-2005-14.
Publisher: Federal Reserve Bank of Chicago
Published: 2005
Place of publication: Chicago, Ill.]
Language: eng
Format: [electronic resource] /
Subjects: Labor contract; Econometric models
Description: "Fixed term employment contracts have been introduced in number of European countries as a way to provide flexibility to economies with high employment protection levels. We introduce these contracts into the equilibrium search model in Alvarez and Veracierto (1999), a version of the Lucas and Prescott island model, adapted to have undirected search and variable labor force participation. We model a contract of length J as a tax on separations of workers with tenure higher than J . We show a version of the welfare theorems, and characterize the efficient allocations. This requires solving a control problem, whose solution is characterized by two dimensional inaction sets. For J = 1 these contracts are equivalent to the case of firing taxes, and for large J they are equivalent to the laissez- faire case. In a calibrated version of the model, we evaluate to what extent contract lengths similar to those observed in Europe, close the gap between these two extremes."--Federal Reserve Bank of Chicago web site.
Notes: Title from PDF file as viewed on 10/5/2006.

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