Short Job Tenures and Firing Taxes in the Search Theory of Unemployment
AbstractThis paper studies the effects of firing taxes on the job destruction rate, when probationperiod - or temporary contract - policies are implemented in an otherwise exogenous jobseparation search model. It is shown that contrary to conventional wisdom, firing taxescan amplify the job turnover rate by providing incentives to destroy surviving matches atthe end of the probation period. Moreover, low skill workers are shown to be moreseverely affected while wage inequality across different productivity groups mayincrease.
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Bibliographic InfoPaper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0628.
Date of creation: Apr 2004
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Labor market policies; Firing taxes; Probation period; Temporary contracts; Unemployment;
Find related papers by JEL classification:
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
- J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
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