Two-Tier Labour Markets in the Great Recession: France Versus Spain Articles uri icon

publication date

  • August 2012

start page

  • 155

end page

  • 187

issue

  • 562

volume

  • 122

international standard serial number (ISSN)

  • 0013-0133

abstract

  • France and Spain have similar labour market institutions and their unemployment rates were both around 8% just before the Great Recession but subsequently that rate has increased to 10% in France and to 23% in Spain. In this article, we assess the part of this differential that is due to the larger gap between the firing costs of permanent and temporary contracts, and the laxer rules on the use of the latter in Spain. A calibrated search and matching model indicates that Spain could have avoided about 45% of its unemployment surge had it adopted the French employment protection legislation