The paper explores the influence of job security provisions on employment and unemployment. We show that this influence depends on the persistence of the macroeconomic fluctuations to which the labour market is exposed, and on employees’ bargaining power in wage negotiations. Specifically, costs of firing and hiring reduce employment and stimulate unemployment when the macroeconomic fluctuations are sufficiently prolonged and employees have sufficient bargaining power; but firing and hiring costs can have the opposite effect if the fluctuations are transient and employees are weak. In this way, the paper offers an explanation for Europe’s favourable unemployment performance vis-à-vis the United States in the 1950s and 1960s (when macroeconomic fluctuations were transient and union strength was moderate), and Europe’s relatively unfavourable unemployment performance since the mid-1970s (when fluctuations were prolonged and unions were stronger).
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
1430.
Find related papers by JEL classification: D8 - Microeconomics - - Information, Knowledge, and Uncertainty E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles J2 - Labor and Demographic Economics - - Demand and Supply of Labor J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs J6 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)