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Author: | Boeri, T. Garibaldi, P. |
Title: | Two tier reforms of employment protection: A honeymoon effect |
Journal: | Economic Journal
2007 : JUN, VOL. 117:521, p. 357-385 |
Index terms: | job creation labour economics labour markets productivity reforms |
Language: | eng |
Abstract: | The recent labour market reforms increasing flexibility 'at the margin' have resulted in employment growth, as planned. This paper aims at demonstrating that two-tier labour market reforms generate a transitional, 'honeymoon' job creating effect. Using a dynamic model of labour demand under uncertainty, the authors predict that the outcome of reforms is a reduction in 'employment inaction' and in the mean and cross-sectional variance of labour productivity after the initial increase in employment. Evidence supporting the empirical implications is found when testing the prediction with firm-level data on Italy in 1995-2000. |
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