The impact of short-term employment contracts on employment volatility and economic fluctuations

Matsue, Toyoki (2020): The impact of short-term employment contracts on employment volatility and economic fluctuations.

Abstract

This study investigates the effects of short-term employment contracts on employment fluctuations and economic fluctuations using a dynamic model with long-term and short-term employment contracts. Numerical experiments show that an increase in the short-term employment ratio amplifies the fluctuations in total employment—when an expected temporary productivity shock occurs—because of the variations in short-term employment being larger than those in long-term employment. Moreover, the large fluctuations in employment lead to the high variations in production and consumption. Promoting the utilization of short-term employment contracts would elicit the amplification of not only the employment fluctuations but also the economic fluctuations.

• Item Type: MPRA Paper
• Language: English
• Keywords: employment fluctuations; short-term employment; labor contract; employment duration; labor market institutions
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E27 - Forecasting and Simulation: Models and Applications; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J20 - General; J - Labor and Demographic Economics > J4 - Particular Labor Markets > J41 - Labor Contracts

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