Working Paper: CEPR ID: DP8691
Authors: Samuel Bentolila; Juan J. Dolado; Juan F. Jimeno
Abstract: This paper presents a case study on reforming a very dysfunctional labour market with a deep insider-outsider divide, namely the Spanish case. We show how a dual market, with permanent and temporary employees makes real reform much harder, and leads to purely marginal changes that do not alter the fundamental features of labour market institutions. While the Great Recession and the start of the sovereign debt crisis triggered two labour reforms, the political economy equilibrium has not allowed them to be transformational enough.
Keywords: dualism; great recession; labour market reform; political economy; temporary contracts
JEL Codes: H29; J23; J38; J41; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| EPL (Z21) | insider-outsider divide (F55) |
| collective bargaining (J52) | insider-outsider divide (F55) |
| EPL (Z21) | unemployment during economic downturns (J64) |
| liberalization of fixed-term contracts since 1984 (J63) | high incidence of temporary contracts (J63) |
| high incidence of temporary contracts (J63) | high turnover of workers (J63) |
| high incidence of temporary contracts (J63) | weak attachment to firms (L14) |
| political economy context (P19) | labor market reforms (J48) |
| external pressures (F69) | timing of reforms (E69) |
| reforms during crisis (H12) | insufficient to address underlying issues (I24) |
| reforms (P41) | benefit insiders (G14) |