In this paper, we argue that the reason why the United States prefer a lower level of employment protection than the European countries lies in the differences in gains and costs from geographical mobility. We present a model where labor migration and employment protection are both determined endogenously. The labor market is modeled within a matching framework, where the employment protection reduces both the job finding and firing rates. Countries with low migration costs and high economic heterogeneity may prefer no employment protection so that workers can move quickly to better horizons rather than being maintained in low productive activities.
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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number
79.
References listed on IDEAS 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.:
John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2005.
"A Positive Theory Of Geographic Mobility And Social Insurance,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 263-303, 02.
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