Eugenia Gonzalez-Aguado
MEGA Salle Carine Nourry
Maison de l'économie et de la gestion d'Aix
424 chemin du viaduc
13080 Aix-en-Provence
Marco Fongoni: marco.fongoni[at]univ-amu.fr
Alexandros Loukas: alexandros.loukas[at]univ-amu.fr
Many economies feature the co-existence of permanent contracts with high employment protection, and temporary, fixed-term contracts. We study how such duality affects the career mobility of workers in a labor market that is segmented along the occupation margin. Specifically, we develop a quantitative theory that sheds light on how duality affects aggregate productivity and unemployment through the channel of career mobility. The mechanism works through the equilibrium distribution of occupational tenure, which is endogenous to the labor market institutions, and which affects aggregate human capital. We explore various policy counterfactuals that address duality in a version of the model calibrated to Spanish labor market outcomes. We find that reforms reducing duality can increase aggregate productivity through an increase of occupational mobility of unemployed workers.