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Employment Protection Reform in Search Economies

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Author Info
Olivier L'Haridon () (GRID, CNRS, ENSAM)
Franck Malherbet () (THEMA, CNRS, Université de Cergy-Pontoise, fRDB and IZA Bonn)

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Abstract

The design of the employment protection legislation (EPL) is of a particular acuity in the European debate on the contours of the EPL reform. In this article we used an equilibrium unemployment model to investigate the virtue of an EPL reform whose modality is a lessening in the red tape and legal costs associated with layoffs and the introduction of an U.S. like experience rating system modelled as a combination of a layoff tax and a payroll subsidy. The reform considered shows that it is possible to improve both the consistency and the efficiency of employment protection policies while leaving the workers' protection untouched on the labor market. These results are consistent with the conventional wisdom that experience rating is desirable, not only as a part of unemployment compensation finance as most studies acknowledge but also as part and parcel of a virtuous EPL system.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2304.

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Length: 47 pages
Date of creation: Sep 2006
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Handle: RePEc:iza:izadps:dp2304

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Related research
Keywords: matching models; employment protection; 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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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!]
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