Pierre Cahuc

Mines Paris, PSL University | ParisTech

This paper documents the existence of judge-specific differences on granting compensation for wrongful dismissal and shows that their consequences are different for small low-performing firms than for other firms. Pro-worker judge bias reduces job creation for all firms, increases the destruction of permanent jobs in small and low-performing firms...

Estimates of the impact of employment protection heavily rely on reduced-form methods, assuming that there are no indirect effects between firms. This paper exploits a labor law reform implemented in Portugal in 2009 which restricted the use of fixed-term contracts for large firms above a specific size threshold, to investigate and quantify spillov...

Does labor court uncertainty and judge subjectivity influence firms’ performance? We study the economic consequences of judge decisions by collecting information on more than 145,000 Appeal court rulings, combined with administrative firm-level records covering the whole universe of French firms. The quasi-random assignment of judges to cases revea...

L’économie est devenue une science expérimentale au même titre que la médecine et la biologie. Comme ces dernières, elle cherche à établir des liens de cause à effet. Pour cela, les économistes s’appuient sur des « expériences » qui consistent à comparer le devenir de groupes tests ayant subi un changement de leur situation économique avec des grou...

This paper analyzes the effectiveness of hiring credits. Using comprehensive administrative data, we show that the French hiring credit, implemented during the Great Recession, had significant positive employment effects and no effects on wages. Relying on the quasi-experimental variation in labor cost triggered by the hiring credit, we estimate a...

This paper investigates the effects of the labor market experience of high school dropouts four years after leaving school by sending fictitious résumés to real job postings in France. Compared to those who have stayed unemployed since leaving school, the callback rate is not raised for those with employment experience, whether it is subsidized or...

The present report on Japan is the seventh of a new series on Investing in Youth which builds on the expertise of the OECD on youth employment, social support and skills. This series covers both OECD countries and countries in the process of accession to the OECD, as well as some emerging economies. The report presents new results from a comprehens...

This paper analyzes the consequences of the taxation of temporary jobs 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 data shows that the taxation of temporary jobs does not reach its objectives: i...

We show the existence of a twin peaks relation between trust and the size of the welfare state that stems from two opposing forces. Uncivic people support large welfare states because they expect to benefit from them without bearing their costs. But civic individuals support generous benefits and high taxes only when they are surrounded by trustwor...

In France, 17% of youths between the ages of 15 and 29 are not in education, employment or training. Many of them are unemployed or inactive, and are poorly qualified to integrate into the job market. This chapter discusses the main obstacles this group faces, as well as possible remedies. Programmes, vocational training, and support in the search...

Revu et mis à jour par les auteurs, ce livre donne un éclairage entièrement nouveau sur le fonctionnement du marché du travail, la manière de penser le chômage et les politiques pour le combattre. Non, le chômage n'est pas une fatalité liée à la mondialisation et au capitalisme financier ; non, un bon salaire n'est pas toujours l'ennemi de l'emploi...

In France, 17% of youths between the ages of 15 and 29 are not in education, employment or training. Many of them are unemployed or inactive, and are poorly qualified to integrate into the job market. This chapter discusses the main obstacles this group faces, as well as possible remedies. Programmes, vocational training, and support in the search...

This survey reviews the recent research on trust, institutions, and economic development. It discusses the various measures of trust and documents the substantial heterogeneity of trust across space and time. The conceptual mechanisms that explain the influence of trust on economic performance and the methods employed to identify the causal impact...

Indemniser au mieux les épisodes de chômage tout en limitant leur durée : telle est la vocation de l'assurance chômage. Loin de remplir cette mission, le système français opère une redistribution à grande échelle entre secteurs d'activité et niveaux de salaire. D'une efficacité limitée, il favorise l'instabilité de l’emploi et contribue à maintenir...

Il existe un paradoxe français : celui d’un bonheur privé et d’un malheur public. Si les Français se disent relativement satisfaits de leur vie privée, et des solidarités familiales et de proximité, ils expriment, en revanche, une grande défiance envers le reste de la société. Ils se déclarent régulièrement plus pessimistes sur leur destin collecti...

This paper evaluates the impact of an unexpected temporary hiring credit targeted at workers paid below 1.6 times the minimum wage in firms with less than 10 employees in France from December 2008 to December 2009. Using rich administrative data covering all French firms, we find that the program has had a strong and rapid impact on employment. The...

This paper presents a short overview of dynamic models of labor markets with transaction costs. It shows that these models have deeply renewed the understanding of job search, job flows, job creations and destructions, unemployment and wage formation. It argues that this renewal provides a very useful toolkit for analyzing important economic policy...

In October 2007, France introduced an exemption on the income tax and social security contributions that applied to wages received for hours worked overtime. The goal of the policy was to increase the number of hours worked. This article shows that this reform has had no significant impact on hours worked. Conversely, it has had a positive impact on...

All in all, it seems that short-time work compensation programs used in downturns have had significant beneficial effects on permanent employment (avoiding job losses and limiting unemployment). However, special attention should be devoted to the design of these programs. They can lead to inefficiency, both over working hours and in the reallocatio...

This survey reviews the recent research on trust, institutions, and economic development. It discusses the various measures of trust and documents the substantial heterogeneity of trust across space and time. The conceptual mechanisms that explain the influence of trust on economic performance and the methods employed to identify the causal impact...

La jeunesse française est coupée en deux, certains s'en sortent, d'autres non. Cette césure est le résultat d'un système social élitiste où l'école et le marché du travail servent de machines à trier. Au bout du compte, les plus faibles sont implacablement éliminés, tout en étant pratiquement exclus des aides sociales jusqu'à 25 ans. Mis à l'écart,...

France and Germany are two polar cases in the European debate about rising youth unemployment. Similar to what can be observed in Southern European countries, a “lost generation” may arise in France. In stark contrast, youth unemployment has been on continuous decline in Germany for many years, hardly affected by the Great Recession. This paper ana...

This article surveys recent research on the relationship between trust and growth. It documents the strong international and interregional heterogeneity of trust. The theoretical mechanisms that explain the influence of trust on economic performance and the empirical methods used to identify the causal impact of trust on economic performance are re...

This paper analyzes the relation between public wage bills and public deficits in the OECD countries from 1995 to 2009. The paper shows that fiscal drift episodes, characterized by simultaneous increases in the GDP shares of public wage bills and budget deficits, are more frequent during booms and election years, but not during recessions, except f...

This paper analyzes the relation between public wage bills and public deficits in the OECD countries from 1995 to 2009. The paper shows that fiscal drift episodes, characterized by simultaneous increases in the GDP shares of public wage bills and budget deficits, are more frequent during booms and election years, but not during recessions, except f...

Youth unemployment is notoriously high in France, in particular for the low-skilled. Within the EU, only the crisis countries of Southern Europe fare worse. This report delivered to the French Council of Economic Analysis analyzes the causes and consequences of this alarming trend. In addition, drawing on the available evidence on various measur...

Does more public jobs increases the total number of jobs ? This article analyses the impact of public employment creation on private sector employment and unemployement. In a macroeconomic approach, the first section focuses on the crowding out effects of public jobs creation on private jobs creation. The effect is found to be large and significant...

The editors, Pierre Cahuc and V. Joseph Hotz, are pleased to present the IZA Journal of Labor Economics (IZAJOLE), a new online journal that covers research in all areas of labor economics. Labor economics is an ever-expanding field ever expanding into new domains. This Journal provides a venue not only for such traditional labor economic topics as...

This article analyses the impact of public employment creation on private sector employment and unemployement, In a macroeconomic approach, the first section focuses on the crowding out effects of public jobs creation on private jobs creation. The effect is found to be large and significant by an empirical study of 17 OECD countries for the period...

The Consequences of Reductions of Employer’s Social Contributions on Employment The general reduction of employer social contributions on low wages is the main employment policy in France with an annual expenditure of about 1 per cent of GDP. This study shows that low skilled jobs in services are the main beneficiaries of this measure. We estimate...

France and Spain have similar labour market institutions and their unemployment rates were both around 8% just before the Great Recession but subsequently that rate has increased to 10% in France and to 23% in Spain. In this article, we assess the part of this differential that is due to the larger gap between the firing costs of permanent and temp...

Résumé Cet article propose un modèle permettant d’expliquer le choix entre CDI et CDD ainsi que la durée extrêmement courte de la plupart des CDD. Ce modèle simple tient compte d’une caractéristique importante de la protection de l’emploi en Europe, négligée par la littérature existante, et montre que la rigueur de la protection des emplois en CDI...

This paper analyzes the relation between public wage bills and public deficits in the OECD countries from 1995 to 2009. The paper shows that fiscal drift episodes, characterized by simultaneous increases in the GDP shares of public wage bills and budget deficits, are more frequent during booms and election years, but not during recessions, except f...

This paper provides a simple model which explains the choice between permanent and temporary jobs. This model, which incorporates important features of actual employment protection legislations neglected by the economic literature so far, reproduces the main stylized facts about entries into permanent and temporary jobs observed in Continental Euro...

Government regulation of firms is associated with more negative externalities and unofficial activity across countries. In this paper I argue that this correlation mainly reflects causality going from concerns about market failures to demand for government intervention. Using trust in others as a proxy for such concerns, I first show that differenc...

Dans le troisième chapitre de Réformer par temps de crise, Pierre Cahuc, Stéphane Carcillo, Olivier Galland et André Zylberberg dressent un constat accablant : fin 2010, le taux de chômage des 15-24 ans a atteint 24 % contre 8,5 % pour les 25-49 ans.Trois raisons essentielles expliquent cette situation. En premier lieu, l’incapacité de notre école...

We use several data sets to consider the effect of teaching practices on student beliefs, as well as on organization of firms and institutions. In cross-country data, we show that teaching practices (such as copying from the board versus working on projects together) are strongly related to various dimensions of social capital, from beliefs in coop...

No abstract available.

The employment rate of women is twice as high in Anglo-Saxon and Scandinavian coun- tries compared to Mediterranean ones while this gap is close to zero for men. This phenom- enon is generally explained by institutions such as labor market and family policies. In this paper it is argued that the institutions detrimental to women employment are shap...

In a cross-section of countries, state regulation of labor markets is strongly negatively correlated with the quality of labor relations. In this paper, we argue that these facts reflect different ways to regulate labor markets, either through the state or through the civil society, depending on the degree of cooperation in the economy. We rationali...

This paper shows that cross country differences in the generosity and the quality of the welfare state are associated with differences in the trustworthiness of their citizens. We show that generous, transparent and efficient welfare states in Scandinavian countries are based on the civicness of their citizens. In contrast, the generosity but low t...

In October 2007 France introduced an exemption on the income tax and social security contributions that applied to wages received for hours worked overtime. The goal of the policy was to increase the number of hours worked. This article shows that this reform has had no significant impact on hours worked. Conversely, it has had a positive impact on...

Short-time work compensation aims at reducing lay-offs by allowing employers to temporarily reduce hours worked while compensating workers for the induced loss of income. These programs are now widespread in the OECD countries, notably following the 2008-2009 crisis. This paper discusses the efficiency of this type of policy and investigates its im...

This paper develops a new method to uncover the causal effect of trust on economic growth by focusing on the inherited component of trust and its time variation. We show that inherited trust of descendants of US immigrants is significantly influenced by the country of origin and the timing of arrival of their forebears. We thus use the inherited tr...

This paper analyzes the strikingly different response of unemployment to the Great Recession in France and Spain. Their labor market institutions are similar and their unemployment rates just before the crisis were both around 8%. Yet, in France, unemployment rate has increased by 2 percentage points, whereas in Spain it has shot up to 19% by the e...

We study the macroeconomic effects of rational asset bubbles in an overlapping-generations economy where asset trading requires specialized intermediaries and where agents freely choose between working in the production or in the financial sector. Frictions in the market for deposits create rents in the financial sector that affect workers' choice...

Flexible labor markets requires geographically mobile workers to be efficient. Otherwise, firms can take advantage of the immobility of workers and extract monopsony rents. In cultures with strong family ties, moving away from home is costly. Thus, individuals with strong family ties rationally choose regulated labor markets to avoid moving and lim...

We analyze the consequences of counseling provided to job seekers in a standard job search and matching model. It turns out that neglecting equilibrium effects induced by counseling can lead to wrong conclusions. In particular. counseling can increase steady state unemployment although counseled job seekers exit unemployment at a higher rate than t...

NBER Working Paper Series - number 15747

Nuestro objetivo es explicar la sorprendente diferencia en la respuesta del paro entre España y otras economías europeas, en particular la francesa, durante la actual recesión. La tasa de paro española, que cayó del 22% en 1994 al 8% en 2007, alcanzó el 19% a finales de 2009, mientras que la francesa apenas ha subido en 2 puntos porcentuales durant...

This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection a...

Analyse des conditions politiques et économiques pour implémenter des réformes en France

This paper characterizes the optimal labor market policy within a dynamic search model which allows for workers' risk aversion. In a …rst-best allocation of resources, unemployment bene…ts should provide perfect insurance against the unemployment risk, layo¤ taxes are necessary to induce employers to internalize the cost of dismissing an employee b...

In order to shed some theoretical light on the impact of labor standards on trade competitiveness, we develop an international trade model with search-matching fric-tions. The traditional sector is labor-intensive, while the modern sector is capital-intensive, and exhibits search frictions in its labor market. We assume that workers in the domestic...

We document that, in a cross section of countries, government regulation is strongly negatively correlated with measures of trust. In a simple model explaining this correlation, distrust creates public demand for regulation, whereas regulation in turn discourages formation of trust, leading to multiple equilibria. A key implication of the model is...

To characterize employment in France in an acute way, it is important to explain why unemployment problems are concentrated in some demographic groups. OECD appraisals from panel data including synthetic information about institutions and performances of each country, within several decades, seams to be too much synthetical to enlighten each of the...

To characterize employment in France in an acute way, it is important to explain why unemployment problems are concentrated in some demographic groups. OECD appraisals from panel data including synthetic information about institutions and performances of each country, within several decades, seams to be too much synthetical to enlighten each of the...

We argue civic virtue plays a key role in explaining the design of public insurance against unemployment risks by solving moral hazard issues which hinder the efficiency of unemployment insurance. We show, in a simple model, that economies with stronger civic virtues are more prone to provide insurance through unemployment benefits rather than thro...

Every working day in the United States, 90,000 jobs disappear--and an equal number are created. This discovery has radically altered the way economists think about how labor markets work. Without this necessary phenomenon of "creative destruction," our economies would experience much lower growth. Unemployment is a natural consequence of a vigorous...

This paper analyzes optimum income taxation in a model with endogenous job destruction that gives rise to unemployment. It is shown that optimal tax schemes comprise both payroll and layoff taxes when the state provides public unemployment insurance and aims at redistributing income. The optimal layoff tax is equal to the social cost of job destruc...

Can public policy interfere with culture, such as beliefs and norms of cooperation? We investigate his question by evaluating the interactions between the State and the Civil Society, focusing on the labor market. International data shows a negative correlation between union density and the quality of labor relations on one hand, and state regulati...

This chapter examines the theoretical underpinnings of the effects of worksharing on employment. The analysis proceeds as follows: Section 4.2 is devoted to an analysis of labour demand when the firm chooses the number of jobs and hours. The interactions between employers' choice and workers' choice over hours, employment, and wages are studied in...

This chapter examines workweek reductions experiments in France. Using the 1982 workweek reduction, it is shown that work-sharing policies, per se, do not work. Put differently, they are not apt to work as long as wage subsidies are not offered to the firms. Their impact of employment and production is then shown using the experience of the experim...

This chapter examines the impact of unions and working-time reductions in Sweden. It is shown that strong unions do not necessarily mean short weekly working hours and, specifically, strong unions do not always demand working-time reductions in order to preserve employment. Explicit workingtime reductions are not the only policies that reduce actua...

This concluding chapter presents a synthesis of the discussions in the preceding chapters. It is argued that in no country that engaged in 'straight' work-sharing (i.e., decreasing the workweek from, say, forty to thirty-five hours) created extra employment. In all countries there were and still are forces pushing for some form of work-sharing. How...

The length of the standard workweek has been a contentious topic in Germany over the past thirty years. In the 1980s and 1990s, trade unions reached agreements to reduce normal hours, in order to raise employment. This chapter begins with an overview of the institutional context and the development of normal hours worked in Germany. Section 5.3 pro...