Jose Galdon-Sanchez

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In this paper we analyze court outcomes of dismissal conflicts for several countries. We
highlight two facts. First, the patterns found are extremely stable in every country over
time. Second, two types of patterns are found: either the workers win most of the cases, or
the worker and the firm win half the times each. We build a model of dismissal conflicts that
explains these facts. The gap between the severance pay for fair and unfair dismissals is a
key factor in the determination of such court outcomes. Those countries with a small gap
have outcomes in which the workers win most of the time, and the average cost of firing is
higher than in those countries with a smaller gap. This suggests that costly dismissals and
rigid employment protection legislation are not necessarily synonymous.

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Citation Key
Guell, M., & Galdon-Sanchez, J. (2000). Let's go to court! Firing costs and dismissal conflicts. Retrieved from (Original work published 08/2000AD)
Working Papers

Job security provisions are commonly invoked to explain the high and persistent European
unemployment rates. This belief has led several countries to reform their labor markets and
liberalize the use of fixed-term contracts. Despite how common such contracts have become
after deregulation, there is a lack of quantitative analysis of their impact on the economy. To
fill this gap, we build a general equilibrium model with heterogeneous agents and firing costs
in the tradition of Hopenhayn and Rogerson (1993). We calibrate our model to Spanish data,
choosing in part parameters estimated with firm-level longitudinal data. Spain is particularly
interesting, since its labor regulations are among the most protective in the OECD, and both
its unemployment and its share of fixed-term employment are the highest. We find that fixedterm
contracts increase unemployment, reduce output, and raise productivity. The welfare
effects are ambiguous.

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Publication Language
Citation Key
Alonso-Borrego, C., Fernandez-Villaverde, J., & Galdon-Sanchez, J. (2004). Evaluating Labor Market Reforms: A General Equilibrium Approach. Retrieved from (Original work published 05/2004AD)
Working Papers