Lochner B (2023)
Publication Type: Journal article
Publication year: 2023
Open Access Link: https://www.degruyter.com/document/doi/10.1515/bejm-2023-0044/html
This paper studies the effects of labor market duality in terms of employment legislation protection (EPL) on labor market volatilities. Modeling contractual heterogeneity through a gap in EPL of temporary and permanent workers (weakly protected temporary/highly protected permanent contracts), I simulate both supply and demand shocks in a New Keynesian model with unemployment. I find that unemployment fluctuations follow an inverted U-shape over the magnitude of the EPL gap: small EPL gaps amplify, while large EPL gaps dampen the reaction of unemployment. In a subsequent empirical analysis, I find that the model’s predictions are consistent with panel data for a large set of OECD countries. Uncovering the non-linear course of unemployment volatility helps reconcile previous divergent research results.
APA:
Lochner, B. (2023). Employment Protection in Dual Labor Markets: Any Amplification of Macroeconomic Shocks? The B.E. Journal of Macroeconomics. https://doi.org/10.1515/bejm-2023-0044
MLA:
Lochner, Benjamin. "Employment Protection in Dual Labor Markets: Any Amplification of Macroeconomic Shocks?" The B.E. Journal of Macroeconomics (2023).
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