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

Author(s): Hélène Benghalem, Pierre Cahuc, Olivier Charlot, Emeline Limon, Franck Malherbet
Publication Date: November 2016
Keyword(s): Employment protection legislation, taxation, Temporary jobs
JEL(s): J63, J64, J68
Programme Areas: Labour Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=11628

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.