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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. Persson, Torsten & Tabellini, Guido, 1999. "Political economics and macroeconomic policy," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 22, pages 1397-1482 Elsevier.
  2. Pierre Cahuc & Yann Algan, 2004. "Job protection: the Macho Hypothesis?," Sciences Po publications 1192, Sciences Po.
  3. 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.
  4. Daron Acemoglu & Joshua Angrist, 1998. "Consequences of Employment Protection? The Case of the Americans with Disabilities Act," NBER Working Papers 6670, National Bureau of Economic Research, Inc.
  5. Christine Jolls & J.J. Prescott, 2004. "Disaggregating Employment Protection: The Case of Disability Discrimination," NBER Working Papers 10740, National Bureau of Economic Research, Inc.
  6. 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.
  7. repec:spo:wpecon:info:hdl:2441/8807 is not listed on IDEAS
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Cited by:
  1. Kahn, Lawrence M., 2010. "Labor Market Policy: A Comparative View on the Costs and Benefits of Labor Market Flexibility," IZA Discussion Papers 5100, Institute for the Study of Labor (IZA).
  2. Winfried Koeniger & Julien Prat, 2007. "Employment Protection, Product Market Regulation and Firm Selection," Economic Journal, Royal Economic Society, vol. 117(521), pages 302-332, 06.
  3. Acharya, Viral V. & Baghai-Wadji, Ramin & Subramanian, Krishnamurthy, 2009. "Labor Laws and Innovation," CEPR Discussion Papers 7171, C.E.P.R. Discussion Papers.
  4. ANT Bozkaya & William R. Kerr, 2009. "Labor Regulations and European Private Equity," Working Papers CEB 09-055.RS, ULB -- Universite Libre de Bruxelles.
  5. Andrea Vindigni & Simone Scotti & Cristina Tealdi, 2013. "Uncertainty and the Politics of Employment Protection," Carlo Alberto Notebooks 298, Collegio Carlo Alberto.
  6. 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).
  7. Salvatori, Andrea, 2010. "Labour contract regulations and workers' wellbeing: International longitudinal evidence," Labour Economics, Elsevier, vol. 17(4), pages 667-678, August.
  8. Bozkaya, Ant & Kerr, William R., 2013. "Labor regulations and European venture capital," Research Discussion Papers 30/2013, Bank of Finland.

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