Pierre Cahuc

Temporary Jobs, Employment Protection and Labor Market Performance

Many European labor markets are characterized by heavy employment protection taxes and the widespread use of fixed-duration contracts. The simultaneous use of these two policy instruments seems somewhat contradictory since the former primarily aims at limiting job destruction whereas the latter clearly intensifies it. In this paper, we use a simple matching model with endogenous job destructions to analyze the impact of a combination of the two policies. We find that the political support of insiders to firing restrictions does not necessarily worsen unemployment. In fact, it may be the willingness of a majority of workers to support the combination of two instruments with opposite effects on job destruction and job creation that increase unemployment and deteriorates efficiency. Moreover, we argue, that the concentration of firm ownership is likely to influence labor market regulations. We show that the preferred point of a majority of workers is a very flexible labor market, without any firing cost when profits are evenly distributed across the labor force (which portrays a situation where firm ownership is extremely dispersed), whereas a combination of job protection and temporary jobs is preferred by workers when the share of profits that they earn is zero (which corresponds to a situation where firm ownership is concentrated among a few shareholders not participating in the labor market).

Should unemployment benefits decrease with the unemployment spell

In this paper, we investigate whether unemployment benefits should decrease with the unemployment spell in a model where both job search intensity and wages are endogenous. Wages are set by collective agreements bargained by insiders. It is shown that a more declining time sequence of unemployment benefits leads to wage increases when the tax rate is given. Such an effect may imply an increase in unemployment and counteracts the response of job search intensity that can be found in standard job search models with a given wage distribution. Calibration exercises suggest that it costs twice as much in terms of welfare loss for the long-term unemployed workers to reduce the unemployment rate by 1% when wages are endogenous than in the standard job search model.

Unemployment Compensation Finance and Labor Market Rigidity

The systematic use of experience rating is an original feature of the U.S. unemployment benefit system. In most states, unemployment benefits are financed by taxing firms in proportion to their separations. Experience rating is a way to require employers to contribute to the payment of unemployment benefits they create through their firing decisions. It is striking that experience rating is absent from the unemployment compensation systems of other OECD countries, where benefits are usually financed by taxes on payrolls, paid by employers or employees, and by government contributions (Holmlund, 1998). Is experience rating only adapted to the U.S. labor market? Would it be suitable in other countries? At first glance, it is likely that experience rating is not desirable in many European labor markets characterized by high firing costs. We provide a simple matching model of a rigid labor market including firing costs, temporary jobs and a minimum wage in order to analyze the issue. Our analysis leads us to argue that experience rating is likely to reduce unemployment and to improve the welfare of low skilled workers in France, and more generally for low skilled workers in a typical rigid Continental European labor market.

Asynchronized multiperiod commitments and cycles

Abstract We consider a game where agents can synchronize or stagger their decisions. We compare the outcomes of both timing patterns, and show that spillovers and strategic interactions are crucial for such a comparison. A typology used in industrial organization, distinguishing four cases (‘Fat-Cat’, ‘Top Dog’, Lean and Hungry’, ‘Puppy Dog’), allows us to compare the actions taken in the staggered variant and in the synchronized one. The staggered variant exhibits cycles and players are both better-off when there are strategic complementarities between them. A timing game is then set-up so as to endogenize the choice between the two variants we study. Two examples are developed: (i) Bertrand competition and (ii) a wage setting game when there are two monopoly unions in two interrelated firms. We show that the staggering of price decisions generates counter-cyclical mark-ups in the first example, and the staggering of wage decisions generates cycling output in the industry in the second example.

Faut-il inciter l'offre ou la demande de travail peu qualifié?

We use dynamical job search matching framework to compare the effects of two policies targeted on low skilled jobs paid at a the minimum wage : reductions of employers’ contributions to social security versus reductions of taxes paid by employees such as the « Prime pour l’Emploi ». Our approach integrates simultaneously job search behaviour and frictional unemployment, contrary to previous literature. This type of model allows us to deal with effects of policies on unemployment rate, employment rate and welfare. Our results suggest that reducing employers contributions has larger effects on unemployment rate and unemployment spell, whereas redducing taxes paid by employees has larger effects on participation rates and welfare. Classification JEL : J64, J65

Équilibres non walrasiens et négociations salariales

[fre] Equilibres non walrasiens et negociations salariales. . Cet article endogeneise le salaire reel dans un modele dequilibres avec rationnements. Le salaire resulte de negociations entre les salaries representes par un syndicat et une entreprise. La relation emploi-salaire est differente selon les regimes de desequilibres et lapparition de ces regimes est contingente au rapport de force entre les protagonistes. Limpact des variations de la demande autonome, des encaisses monetaires, des allocations chomage et du pouvoir syndical est different dans chaque regime. [eng] Wage bargaining with non walrasian equilibria . . This paper deals whith the determination of the real wage in a macroeconomic model with rationing. The real wage is determined by a bargaining between an union reprensenting workers and a firm. The wage employment relation is specifie in every disequilibrium regime and the apparition of the regimes depends on the bargaining power of the protagonists. The effects of changes in autonomous spending, quantity of money, unemployment benefits, and union power are different in every regime.