Competition for Jobs in a Growing Economy and the Emergence of Dualism

Abstract

The objective of the article is to explain the rising share of short‐term employment in Europe. In a matching model, it is shown that a slowdown in the growth of labour productivity leads to the emergence of temporary (short‐term) jobs and increases their share of total employment. Higher population growth also increases the share of temporary jobs. Finally, the much blamed firing costs are found to be neutral when there is no floor on wages. In addition, in periods of low growth, the rise in the share of short‐term jobs weakens workers' bargaining position.