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Employment protection reform in search economies

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Author Info
L'Haridon, Olivier
Malherbe, Franck

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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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Publisher 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
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Related research
Keywords: Search and Matching Models; Employment Protection; State-Contingent Layo Tax; Experience-Rating;

Other versions of this item:

Find related papers by JEL classification:
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
J60 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - General

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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.:
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Full references

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.)

  1. Besancenot, Damien & Vranceanu, Radu, 2007. "Multiple Equilibria in a Firing Game With Impartial Justice," ESSEC Working Papers DR 07025, ESSEC Research Center, ESSEC Business School. [Downloadable!]
    Other versions:
  2. Steffen Ahrens & Dennis Wesselbaum, 2009. "On the Introduction of Firing Costs," Kiel Working Papers 1559, Kiel Institute for the World Economy. [Downloadable!]
  3. Dennis Wesselbaum, 2009. "Firing Costs in a New Keynesian Model with Endogenous Separations," Kiel Working Papers 1550, Kiel Institute for the World Economy. [Downloadable!]
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