Flexibility at the Margin and Labor Market Volatility in OECD Countries

Hector Sala, José I. Silva, Manuel Toledo

Research output: Contribution to journalArticleResearchpeer-review

28 Citations (Scopus)


We study the business-cycle behavior of segmented labor markets with flexibility at the margin (e.g., just affecting fixed-term contracts). We present a matching model with temporary and permanent jobs (i) where there is a gap in the firing costs associated with these types of jobs and (ii) where there are restrictions in the creation and duration of fixed-term contracts. We show that a labor market with "flexibility at the margin" increases the unemployment volatility with respect to one that is fully regulated. This analysis yields new insights into the interpretation of the recent volatility changes witnessed in the OECD area. © The editors of The Scandinavian Journal of Economics 2012.
Original languageEnglish
Pages (from-to)991-1017
JournalScandinavian Journal of Economics
Issue number3
Publication statusPublished - 1 Sept 2012


  • Flexibility at the margin
  • Search and matching model
  • Separation costs
  • Volatility


Dive into the research topics of 'Flexibility at the Margin and Labor Market Volatility in OECD Countries'. Together they form a unique fingerprint.

Cite this