Taxation of Temporary Jobs: Good Intentions With Bad Outcomes?
Olivier Charlot, University of Cergy
This paper analyzes the consequences of the taxation of temporary jobs of short duration 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 date 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 tenur would have opposite effects.