We develop a theoretical model of firm dynamics and unemployment and characterize equilibria with tenure dependent separation taxes. The model is a version of the Lucas and Prescott island model with undirected search. Two equivalent decentralizations are considered: one with spot labor markets...

This paper analyzes the effects of fixed-term contracts using a version of the Lucas and Prescott island model with undirected search. A fixed-term contract of length J is modeled as a tax on separations of workers with tenure higher than J . While in principle these policies require a very...

The authors explore the quantitative effects of introducing temporary employment contracts of various lengths after first calibrating an equilibrium search model with undirected search and an out-of-the-labor-force state to pre-1984 Spain. They find that introducing temporary contracts of three...

Fixed term employment contracts have been introduced in a number of European countries as a way to provide flexibility to economies with high employment protection levels. We introduce these contracts into the equilibrium search model in Alvarez and Veracierto (1999), a version of the Lucas and...

We develop a dynamic model of transitions in and out of employment. A worker finds a job at an optimal stopping time, when a Brownian motion with drift hits a barrier. This implies that the duration of each worker's jobless spells has an inverse Gaussian distribution. We allow for arbitrary...