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Unemployment and Employment Protection in a Unionized Economy with Search Frictions

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  • Nikolai Stähler

Abstract

In the theoretical literature, the effects of employment protection on unemployment are ambiguous. Higher employment protection reduces job creation as well as job destruction. However, in most models, wages are bargained individually between workers and firms. Using a conventional matching model in which a monopoly union sets wages, I show that employment protection can unambiguously increase unemployment. Interestingly, I find that tightening the restrictions on redundancies and dismissals may even increase the probability of dismissal. Copyright 2008 The Author. Journal compilation CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd. 2008.

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Article provided by CEIS in its journal LABOUR.

Volume (Year): 22 (2008)
Issue (Month): 2 (06)
Pages: 271-289

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Handle: RePEc:bla:labour:v:22:y:2008:i:2:p:271-289

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  1. Pesaran, M.H. & Pettenuzzo, D. & Timmermann, A., 2006. "Learning, Structural Instability and Present Value Calculations," Cambridge Working Papers in Economics 0602, Faculty of Economics, University of Cambridge.
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Cited by:
  1. Moser, Christoph & Stähler, Nikolai, 2009. "Spillover effects of minimum wages in a two-sector search model," Discussion Paper Series 1: Economic Studies 2009,01, Deutsche Bundesbank, Research Centre.

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