Discussion paper

DP11628 Taxation of Temporary Jobs: Good Intentions With Bad Outcomes ?

This paper analyzes the consequences of the taxation of temporary jobs recently introduced in several European countries to induce firms to create more open-ended contracts and to increase the duration of jobs. The estimation of a job search and matching model on French data shows that the taxation of temporary jobs does not reach its objectives: it reduces the mean duration of jobs and decreases job creation, employment and welfare of unemployed workers. We find that a reform introducing an open-ended contract without layoff costs for separations occurring at short tenure would have opposite effects.

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Citation

Cahuc, P, O Charlot, F Malherbet, H Benghalem and E Limon (2016), ‘DP11628 Taxation of Temporary Jobs: Good Intentions With Bad Outcomes ?‘, CEPR Discussion Paper No. 11628. CEPR Press, Paris & London. https://cepr.org/publications/dp11628