Research and publications

Employment Protection Reforms: From Firm-Level Effects to Aggregate Outcomes

joint work with Pierre Cahuc, Pauline Carry and Pedro S. Martins

Abstract: Employment protection legislation often varies with firm or establishment size and age, and many evaluations of EPL reforms exploit these thresholds. This paper develops a search-and-matching model with multi-establishment firms to disentangle direct effects from general-equilibrium spillovers. We combine the model with quasi-experimental evidence from a 2009 Portuguese reform that restricted fixedterm contracts in young establishments of large firms. Spillovers barely distort the reduced-form estimate, yet they overturn the aggregate conclusion: extrapolating the reduced-form estimate implies a 1.51% employment decline, compared with a 0.11% increase in general equilibrium. Counterfactuals show that conditioning EPL on size versus age can yield opposite welfare effects, even when employment effects are similar, and that fixed-term contract and firing restrictions must be evaluated jointly. 

| Current Version | Working paper: CREST, CEPR, Rockwool Foundation | 

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Fragmented Stability: Recalls and Fixed-Term Contracts in a Dual Labour Market

joint work with Olivier Charlot and Eloise Menestrier

Abstract: This paper documents a neglected dimension of labour market dualism: the repeated hiring of the same worker by the same employer through short fixed-term contracts. Using exhaustive French hiring declarations from 2012 to 2019, we show that recalls account for a large share of employment entries and that, unlike the classic temporary-layoff patterns emphasised in the United States, they occur overwhelmingly through fixed-term contracts of very short duration. Many workers are repeatedly rehired by the same employer, often several times within a year, while successive recalled contracts frequently have similar durations and are separated by short interruptions. These patterns reveal employment relationships that persist at the employer–worker dyad level while remaining fragmented at the contractual level, a configuration we term fragmented stability. We introduce an empirical measure of this phenomenon based on the timing of recalls and the similarity of successive contracts, and show that it represents a quantitatively important component of fixed-term hiring flows. We also find that many recall sequences appear difficult to reconcile with a strict reading of the intended constraints governing the repeated use of fixed-term contracts. Overall, our results suggest that labour market dualism operates not only through the coexistence of permanent and temporary jobs, but also through the repeated interruption and reactivation of persistent employer–worker relationships. 

| Current Version | Working paper: IZA (old version), Chaire SPP (old version), CREST WP (revised version)|

| Policy note: Institut des politiques publiques |

| Media Coverage: Le Monde,  Alternatives Economiques, l'Humanité, Challenges |

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The Detrimental Effect of Job Protection on Employment: Evidence from France

with Pierre Cahuc and Julien Prat (Reject and Resubmit to the Journal of Political Economy)

Abstract: According to French law, employers have to pay at least six months salary to employees whose seniority exceeds two years in case of unfair dismissal. We show, relying on data, that this regulation entails a hike in severance payments at two-year seniority which induces a significant rise in the job separation rate before the two-year threshold and a drop just after. The layoff costs and its procedural component are evaluated thanks to the estimation of a search and matching model which reproduces the shape of the job separation rate. We find that total layoff costs increase with seniority and are about four times higher than the expected severance payments at two years of seniority. Counterfactual exercises show that the fragility of low-seniority jobs implies that layoff costs reduce the average job duration and increase unemployment for a wide set of empirically relevant parameters. 

| Current version | Working paper: CEPR, IZA |

| Media Coverage: Vox-EU |

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Employment Effects of Restricting Fixed-Term Contracts: Theory and Evidence 

with Pierre Cahuc, Pauline Carry and Pedro S. Martins

Abstract: This paper examines a labor law reform implemented in Portugal in 2009 which restricted the use of fixed-term contracts to reduce labor market segmentation. The reform targeted establishments created by large firms above a specific size threshold, covering about 15% of total employment. Drawing on linked employer-employee longitudinal data and regression discontinuity methods, we find that, while the reform was successful in reducing the number of fixed-term jobs, it did not increase the number of permanent contracts and decreased employment in large firms. However, we find evidence of positive spillovers to small firms that may bias reduced form estimates. To evaluate general equilibrium effects, we build and estimate a directed search and matching model with endogenous number of establishments and jobs. We find spillover effects that induce small biases on reduced form estimates but that significantly change the evaluation of the overall impact of the reform because they diffuse to the whole economy. We estimate that the reform slightly reduced aggregate employment and had negative effects on the welfare of employees and unemployed workers. 

| Current version | Working paper: CEPR, IZA |

| Media Coverage: Vox-EU Atlantico |

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The Widespread Presence and Effects of Temporay Jobs  

with Pedro S. Martins (forthcoming in Handbook of Labor Market in Transition)

Abstract: Temporary contracts are a key dimension of many (but not all) labour markets. In this chapter, we provide a brief overview of the large theoretical and empirical literature about these types of contracts. First, we argue that temporary contracts are driven by labour demand, institutional, and bargaining factors. Second, we present findings across worker, firm, and institutional outcome dimensions. In some of these areas, the literature does not yet provide consistent findings. We also make several suggestions for further research, including evaluating the impact of temporary contracts designs, unemployment insurance experience rating schemes, and labour market power. More detailed data sources may be required in some cases.

| Current version | Working paper: n/a |

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Minimum Wage Spillovers in an Equilibrium Search and Matching Model

joint work with Olivier l'Haridon and Denys Médée-Welter

Abstract:  TBA

| In preparation |

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Job Mobility and Creative Destruction: Flexicurity in the Land of Schumpeter

joint work with Francis Kramarz, Hèlène Turon and Josef Zweimüller

Abstract:  TBA

| In preparation |

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