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The Demand for Job Protection. Some Clues from Behavioural Economics

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Author Info

  • Fabio D'Orlando

    (University of Cassino)

  • Francesco Ferrante

    (University of Cassino)

Abstract

Radical differences in labour market regulations among countries that in other institutional respects are quite similar are still surprisingly frequent. Nonetheless, traditional theoretical analysis meets enormous difficulties in explaining these differences. The scope of our paper is to show that some clues from behavioural economics could be used to better theoretically treat this problem. Our argument is that workers are different, due to the effects of both culture and education. In particular, building on empirical evidence, we argue that loss aversion and hedonic adaptation are culturally-determined and country-specific aptitudes and that they may help explaining why workers, either employed or unemployed, ask for job protection and are willing to pay the cost of it. The main conclusion of our analysis is that, for poorly educated workers sharing a fatalist view of life, job protection can be more effective than public social expenditure. As a consequence, we suggest that countries with a poorly educated and fatalist workforce will be more prone to offer protection through job protection rather than public social expenditure, which is exactly what the empirical evidence shows.

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Bibliographic Info

Paper provided by Universita' di Cassino, Dipartimento di Scienze Economiche in its series Working Papers with number 2008-04.

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Length: 24 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:css:wpaper:2008-04

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Postal: Dipartimento di Scienze Economiche Via S. Angelo Loc. Folcara 03043 Cassino (FR) - Italy
Phone: +3907762994734
Fax: +3907762994834
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Web page: http://www.eco-giu.uniclam.it/Dipartimento/Info
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Keywords: employment protection legislation; behavioural economics; loss aversion; endowment effect; hedonic adaptation; redistribution;

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References

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Cited by:
  1. D'Orlando, Fabio & Ferrante, Francesco & Ruiu, Gabriele, 2011. "Culturally based beliefs and labor market institutions," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(2), pages 150-162, April.
  2. Fabio D'Orlando, 2010. "Swinger Economics," Working Papers 2010-01, Universita' di Cassino, Dipartimento di Scienze Economiche.
  3. Di Gioacchino, Debora & Sabani, Laura & Tedeschi, Simone, 2014. "Preferences for social protection: Theory and empirics," Economic Modelling, Elsevier, vol. 36(C), pages 629-644.
  4. Fabio D’Orlando, 2011. "The Demand for Pornography," Journal of Happiness Studies, Springer, vol. 12(1), pages 51-75, March.
  5. Debora Di Gioacchino & Laura Sabani, 2009. "The Politics of Social Protection: Social Expenditure versus Markets' Regulation," Working Papers 116, University of Rome La Sapienza, Department of Public Economics.

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