Taxation of Temporary Jobs: Good Intentions with Bad Outcomes?

By: Cahuc, Pierre (Ecole Polytechnique, Paris) ; Charlot, Olivier (University of Cergy-Pontoise) ; Malherbet, Franck (CREST (ENSAE)) ; Benghalem, Helène (CREST) ; Limon, Emeline (University of Cergy-Pontoise)
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 layout costs for separations occurring at short tenure would have opposite effects.
Keywords: temporary jobs, employment protection legislation, taxation
JEL: J63 J64 J68


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