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Employment protection reform in search economies

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  • L'Haridon, Olivier
  • Malherbe, Franck

Abstract

The design of employment protection legislation (EPL) is of particular importance in the European debate on the contours of labor market reform. In this article we appeal to an equilibrium unemployment model to investigate the virtues of EPL reform which reduces the red tape and legal costs associated with layo s and introduces a U.S.-style experiencerating system, which we model as a combination of a layo tax and a payroll subsidy. The reform considered shows that it is possible to improve the eciency of employment protection policies without a ecting the extent of worker protection on the labor market. These results are consistent with the conventional wisdom that experience rating is desirable, not only as an integral component of unemployment-compensation nance, as most studies acknowledge, but also as part and parcel of a virtuous EPL system.

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Bibliographic Info

Paper provided by HEC Paris in its series Les Cahiers de Recherche with number 910.

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Length: 35 pages
Date of creation: 01 Apr 2008
Date of revision:
Handle: RePEc:ebg:heccah:0910

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Postal: HEC Paris, 78351 Jouy-en-Josas cedex, France
Web page: http://www.hec.fr/
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Keywords: Search and Matching Models; Employment Protection; State-Contingent Layo Tax; Experience-Rating;

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References

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Citations

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Cited by:
  1. Samuel Bentolila & Pierre Cahuc & Juan J. Dolado & Thomas Le Barbanchon, 2010. "Two-Tier Labor Markets In The Great Recession: France Vs. Spain," Working Papers wp2010_1009, CEMFI.
  2. Besancenot, Damien & Vranceanu, Radu, 2009. "Multiple equilibria in a firing game with impartial justice," Labour Economics, Elsevier, vol. 16(3), pages 262-271, June.
  3. Dennis Wesselbaum, 2009. "Firing Costs in a New Keynesian Model with Endogenous Separations," Kiel Working Papers 1550, Kiel Institute for the World Economy.
  4. Cahuc, Pierre & Charlot, Olivier & Malherbet, Franck, 2012. "Explaining the Spread of Temporary Jobs and its Impact on Labor Turnover," CEPR Discussion Papers 8864, C.E.P.R. Discussion Papers.
  5. Damien Besancenot & Radu Vranceanu, 2008. "Multiple equilibria in a firing game with impartial justice," Working Papers halshs-00203176, HAL.
  6. Samuel Bentolila & Pierre Cahuc & Juan José Dolado & Thomas Le Barbanchon, ., 2010. "Unemployment and Temporary Jobs in the Crisis: Comparing France and Spain," Working Papers 2010-07, FEDEA.
  7. Saltari, Enrico & Tilli, Riccardo, 2009. "The role and significance of endogenous firing costs in a matching model with endogenous job destruction," The Journal of Socio-Economics, Elsevier, vol. 38(5), pages 799-808, October.
  8. Jean-Baptiste Michau, 2012. "Optimal labor market policy with search frictions and risk-averse workers," Working Papers hal-00757173, HAL.
  9. Steffen Ahrens & Dennis Wesselbaum, 2009. "On the Introduction of Firing Costs," Kiel Working Papers 1559, Kiel Institute for the World Economy.

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