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Employment protection: Tough to scrap or tough to get?

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  • Björn Brügemann

Abstract

If legislating employment protection is a protracted process subject to time delays, then firms can dismiss workers before an increase in protection is implemented. Heightened risk of dismissal before implementation makes workers in countries with flexible labour markets reluctant to support proposals for more stringent protection. In the model developed in this article, this mechanism provides a novel source of "status quo" bias which can sustain differences in employment protection across countries. While in previous work "status quo" bias arises because a constituency effect makes employment protection difficult to deregulate, here the bias arises because protection is difficult to introduce. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 117 (2007)
Issue (Month): 521 (06)
Pages: 386-415

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Handle: RePEc:ecj:econjl:v:117:y:2007:i:521:p:386-415

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  1. Pedro Portugal & Olivier Blanchard, 2001. "What Hides Behind an Unemployment Rate: Comparing Portuguese and U.S. Labor Markets," American Economic Review, American Economic Association, vol. 91(1), pages 187-207, March.
  2. Gilles Saint-Paul, 2002. "The Political Economy of Employment Protection," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 672-701, June.
  3. Yann Algan & Pierre Cahuc, 2006. "Job Protection: The Macho Hypothesis," Oxford Review of Economic Policy, Oxford University Press, vol. 22(3), pages 390-410, Autumn.
  4. Christine Jolls & J.J. Prescott, 2004. "Disaggregating Employment Protection: The Case of Disability Discrimination," NBER Working Papers 10740, National Bureau of Economic Research, Inc.
  5. Torsten Persson & Guido Tabellini, . "Political Economics and Macroeconomic Policy," Working Papers 121, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  6. Daron Acemoglu & Joshua D. Angrist, 2001. "Consequences of Employment Protection? The Case of the Americans with Disabilities Act," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 915-957, October.
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Cited by:
  1. Salvatori, Andrea, 2010. "Labour contract regulations and workers' wellbeing: International longitudinal evidence," Labour Economics, Elsevier, vol. 17(4), pages 667-678, August.
  2. ANT Bozkaya & William R. Kerr, 2009. "Labor Regulations and European Private Equity," Working Papers CEB 09-055.RS, ULB -- Universite Libre de Bruxelles.
  3. Lawrence M. Kahn, 2012. "Labor market policy: A comparative view on the costs and benefits of labor market flexibility," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 31(1), pages 94-110, December.
  4. Winfried Koeniger & Julien Prat, 2007. "Employment Protection, Product Market Regulation and Firm Selection," Working Papers 07-03, Utrecht School of Economics.
  5. Kahn, Lawrence M., 2007. "Employment Protection Reforms, Employment and the Incidence of Temporary Jobs in Europe: 1995–2001," IZA Discussion Papers 3241, Institute for the Study of Labor (IZA).
  6. Acharya, Viral V. & Baghai-Wadji, Ramin & Subramanian, Krishnamurthy, 2009. "Labor Laws and Innovation," CEPR Discussion Papers 7171, C.E.P.R. Discussion Papers.
  7. Andrea Vindigni & Cristina Tealdi, 2012. "Uncertainty and the Politics of Employment Protection," Working Papers 6/2012, IMT Institute for Advanced Studies Lucca, revised May 2013.

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