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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 temporary contracts, and the laxer rules on the use of the latter in Spain. A calibrated search and matching model indicates that Spain could have avoided about 45% of its unemployment surge had it adopted the French employment protection legislation.

We investigate the effects of two reforms of temporary employment using panel data on Italian firms. We exploit variation in their implementation across regions and sectors for identification. Our results show that the reform of apprenticeship contracts increased job turnover and induced the substitution of external staff with firms' apprentices, with an overall productivity-enhancing effect. The reform of fixed-term contracts instead did not produce the intended results: it induced a substitution of temporary employees in favour of external staff and reduced capital intensity, generating productivity losses. We estimate substitution elasticities across various types of temporary contracts that are consistent with this interpretation.

The liberalisation of temporary contracts has led to a sizeable share of jobs covered by temporary contracts. This article proposes a matching model of unemployment in which temporary (fixed-term) and permanent (open-ended) jobs coexist in a long-run equilibrium. From the labour demand standpoint, the choice of the type of contract leads to a trade-off between an ex-ante speed of hiring and an ex-post flexible dismissal rate. Empirically, we test with Italian longitudinal data whether nonemployment spells that lead to a temporary job are shorter on average. The empirical evidence strongly supports our theoretical prediction.

In recent decades, economic policy makers across Europe have sought to increase labour market flexibility by promoting the use of temporary employment. The articles in this Feature provide new results on how fixed-term and agency work contracts affect firm productivity and how the segments of two-tier labour markets interact. This article points to a possible trade-off between efficiency and equity when deregulating labour markets. Taken together, the evidence presented in this Feature suggests that flexible forms of employment can be both a boon and a bane for labour markets and for society as a whole.

This study investigates the effect of temporary agency work on the user firm's productivity. We hypothesise that using temporary agency work to enhance numerical flexibility and to screen job candidates may increase productivity, whereas temporary workers' lower firm-specific human capital and spillover effects on the user's permanent employees may adversely affect productivity. Other than the sparse existing literature on this issue, we exploit a large panel data set and control for time-invariant and time-varying unobserved heterogeneity by using the system GMM estimator. We find a robust hump-shaped effect of the extent of temporary agency work on the user firm's productivity.

In this article, I analyze diverging political pathways of labor market reform with an empirical focus on the cases of Japan and Korea. Despite similar trends of regulatory reform toward the increase of labor market flexibility, the patterns of labor market reform differed in the two countries. Japan adopted labor market liberalization for nonregular workers with the persistence of employment protection for regular workers. In contrast, Korea opted for regulatory reform for all workers while simultaneously strengthening workers' basic rights and improving protections for nonregular workers. I argue that the institutional features of the employment protection system determine the diverging patterns of labor market reform in Japan and Korea.

Unconventional monetary easing conducted by the Bank of Japan (BOJ) since 2013 has contributed to the yen’s depreciation, higher stock prices, and higher corporate profits. Meanwhile, the impacts on aggregate demand and inflation have not been as strong as the BOJ expected while the adverse impact on financial institutions and deep distortion in the financial and capital markets have become prevalent. Therefore, the BOJ will eventually need to make it more sustainable before underlying inflation approaches 2%. Leaving room for additional monetary accommodation in the event of severe recession is also essential. Keeping the possible phasing out of the program in mind, the BOJ explicitly expanded the target range to  ± 0.2% in July 2018, thereby effectively enabling to raise the yields of 10 years and longer and steepening the yield curve. At the same time, the BOJ introduced flexibility on exchange-traded fund (ETF) purchases that would enable “stealth tapering” or cutting the amount of annual purchase amount quietly without declaring it openly—as in the case of Japanese Government Bond (JGB) purchases. The BOJ should interpret the 2% price stability target flexibly—such as the incorporation of the 1% upper and lower range (± 1%) to the 2% target—to complete tapering of both JGBs and ETFs, as well as ultimately eliminating the 10-year yield target. Since the Japanese economy is likely to face an economic slowdown after the 2019 consumption tax hike and the 2020 Tokyo Olympic Games, it will be much longer before the BOJ can take decisive steps to normalize monetary policy by raising the short-term policy rates like the Federal Reserve.

A study of \"best thinking\" in 41 major companies with large R&D centers confirms that the field of compensation is moving in new directions. Although the new program concepts are not yet widely used, a number of forward-looking companies have transformed their programs, and the new concepts are being widely discussed. An underlying theme is the use of compensation as a management tool to achieve organizational goals. One of the key changes is the shift from the tightly structured ranges and centralized control of traditional programs to salary or career bands. The bands increase flexibility to respond to labor market trends and to recognize individual growth and contribution. There is also a proliferation of specialized team and group incentives. Overall, these changes represent a new compensation model, one that is well-suited to the R&D/technology environment.