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Abstract
Departing from the notion that labour legislation should be founded in the generation of job stability a model for recruitment is presented in which the employer is likened to the holder of an investment portfolio containing two real derivatives – swap or the option of sale. This model allows us on one hand to analyze sensitivity to the variables that are at play in an employment contract and, on the other, look at the effects that the most recent reforms in Spanish labour laws have had on contracting decisions made by employers. The results are clear: social security benefits are shown to be the most sensitive variable on the work contract, and applying the changes proposed in the latest labour reforms, this effect is upheld. The study concludes that reducing the costs of dismissal does not increase the likelihood of employers’ taking on new staff.
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