The impact of short-term employment contracts on employment volatility and economic fluctuations

This study investigates the effects of short-term employment contracts on employment fluctuations and economic fluctuations using a dynamic model with long-term and short-term employment contracts. Numerical experiments show that an increase in the short-term employment ratio amplifies the fluctuations in total employment—when an expected temporary productivity shock occurs—because of the variations in short-term employment being larger than those in long-term employment. Moreover, the large fluctuations in employment lead to the high variations in production and consumption. Promoting the utilization of short-term employment contracts would elicit the amplification of not only the employment fluctuations but also the economic fluctuations