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  • GARIBALDI, PIETRO

Abstract

This paper studies the effects of employment protection legislation when job separation requires a mandatory advance notice or a firm s costly closure. In a tight labor market, firms use mandatory notice since job-to-job transitions reduce the expected firing costs. In a world without the lengthy procedure imposed by advance notice, job turnover is mainly accommodated by unemployment inflows. As notice length increases, the fraction of job turnover accounted for by job-to-job movements increases. These results are consistent with the fact that the North American and European markets, despite their difference in employment protection legislation, have different unemployment flows but similar job flows.

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Bibliographic Info

Article provided by Cambridge University Press in its journal Macroeconomic Dynamics.

Volume (Year): 8 (2004)
Issue (Month): 01 (February)
Pages: 51-75

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Handle: RePEc:cup:macdyn:v:8:y:2004:i:01:p:51-75_02

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Cited by:
  1. Boeri, Tito & Garibaldi, Pietro, 2002. "Shadow Activity and Unemployment in a Depressed Labour Market," CEPR Discussion Papers 3433, C.E.P.R. Discussion Papers.
  2. Sunde, Uwe, 2002. "Unobserved Bilateral Search on the Labor Market: A Theory-Based Correction for a Common Flaw in Empirical Matching Studies," IZA Discussion Papers 520, Institute for the Study of Labor (IZA).

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