Temporary job contracts account for a substantial proportion of the workforce in countries such as France and Spain, but they can result in high job turnover and instability. This column assesses the impact of government policies that impose taxes on temporary contracts to induce employers to lengthen job durations. Such policies a negative impact on the labour market, reducing the mean duration of jobs and decreasing job creation. The introduction of open-ended contracts with no termination cost for separations occurring at short tenure may be more effective.
Pierre Cahuc, Olivier Charlot, Franck Malherbet, Hélène Benghalem, Emeline Limon, 05 January 2017
Juan Dolado, Etienne Lalé, Nawid Siassi, 30 January 2016
The dual labour markets of Southern Europe and France create a ‘revolving door’ through which many workers – especially youths – rotate between dead-end jobs and unemployment. The problem lies in the difference between the costs of firing workers on permanent versus temporary contracts. This column proposes a framework for evaluating what the optimal single contract should look like taking account of transitional issues and political economy constraints.
Robert Townsend, Weerachart Kilenthong, 09 November 2014
In the aftermath of the Global Crisis, models with pecuniary externalities have gained popularity. This column presents a new framework that encompasses many of these externalities. The authors also show how to design financial contracts and markets in such a way that ex ante competition can achieve a constrained-efficient allocation.
Patrick Legros, Estelle Cantillon, 18 October 2007
Mechanism design theory is a major breakthrough in the modern economic analysis of institutions and markets. It revolutionalised the way economists think about optimal institutions and regulation when governments don't “know it all.” It has had a major impact on current policy-making and will continue to do so in the future.