The Impact of the 2012 Spanish Labour Market Reform on Unemployment Inflows and Outflowsa Regression Discontinuity Analysis using Duration Models

  1. José Ignacio García-Pérez 1
  2. Josep Mestres Domènech 2
  1. 1 Universidad Pablo de Olavide
    info

    Universidad Pablo de Olavide

    Sevilla, España

    ROR https://ror.org/02z749649

  2. 2 CaixaBank Research
Revista:
Hacienda Pública Española / Review of Public Economics

ISSN: 0210-1173

Año de publicación: 2019

Título del ejemplar: Impact Evaluation of Public Policies : 2019

Número: 231

Páginas: 157-200

Tipo: Artículo

DOI: 10.7866/HPE-RPE.19.4.5 DIALNET GOOGLE SCHOLAR lock_openAcceso abierto editor

Otras publicaciones en: Hacienda Pública Española / Review of Public Economics

Resumen

This paper studies the impact of the 2012 Spanish labour market reform on the probability of exiting and entering unemployment using a regression discontinuity approach based on duration models. The 2012 reform modified important aspects of hiring and dismissal procedures in Spain. By doing so, it affected the probability of exiting both unemployment and employment. Comparing labour market performance before and after February 2012 and using a competing risk duration model for the exit from both unemployment and employment, we find that the reform contributed to employment creation in two ways. First, it increased the likelihood of exiting from unemployment to employment by increasing the monthly transition to permanent employment from 1.7% to 2.6%, on average, for the first twelve months of unemployment. Second, it reduced the probability of exiting from employment for workers on a temporary contract, particularly at small firms, most likely because the firms were using newly introduced internal flexibility measures to adjust the workforce instead of using external flexibility measures. The direct transition from temporary to permanent positions was also eased by the reform. Finally, we do not find any significant effect of the reform on the dismissal patterns for permanent workers. These findings point to a positive effect of the reform in dampening the widespread segmentation of the Spanish labour market, although the impact is so far small, which means that more effort will be needed to substantially reduce the strong duality of this labour market.

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