The Shortcomings of a Partial Release of Employment Protection Laws: The Case of the 2005 French Reform

December 1, 2006

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper proposes an ex ante evaluation of the effects of new labor contracts such as the "Contrat Nouvelle Embauche" (CNE) introduced in France in 2005. The lessons we draw are of sufficiently general interest to be applicable to other countries or reforms of employment protection laws. Using a model that captures the characteristics of the French labor market, we simulate the effects of this reform on unemployment, employment, and welfare. We estimate that the CNE will lead to the creation of 70,000 additional jobs in the long run, but at the cost of a slight deterioration in welfare.

Subject: Job creation, Labor, Labor force, Labor markets, Unemployment

Keywords: CDD contract, CDI contract, CNE contract, CNE reform, CNE-type contract, Employment protection, Global, Job creation, labor contract, Labor force, Labor markets, reform, search models, severance cost, Unemployment, WP

Pages:
40
Volume:
2006
DOI:
https://doi.org/10.5089/9781451865615.001
Issue:
301
Series:
Working Paper No. 2006/301
Stock No:
WPIEA2006301
ISBN:
9781451865615
ISSN:
1018-5941

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