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Employment Protection Reform in Search Economies

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  • L'Haridon, Olivier

    ()
    (HEC Paris)

  • Malherbet, Franck

    ()
    (University of Rouen)

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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Bibliographic 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
Date of revision:
Publication status: published in: European Economic Review, 2009, 53 (3), 255-273
Handle: RePEc:iza:izadps:dp2304

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Keywords: matching models; employment protection; experience rating;

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Cited by:
  1. Besancenot, Damien & Vranceanu, Radu, 2007. "Multiple Equilibria in a Firing Game With Impartial Justice," ESSEC Working Papers, ESSEC Research Center, ESSEC Business School DR 07025, ESSEC Research Center, ESSEC Business School.
  2. Andrey Launov & Klaus Wälde, 2013. "Thumbscrews for Agencies or for Individuals? How to Reduce Unemployment," Working Papers, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz 1307, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 01 Sep 2013.
  3. Julien Albertini & Xavier Fairise, 2009. "Search frictions, real wage rigidities and theoptimal design of unemployment insurance: a study in a DSGE framework," Documents de recherche, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne 09-03, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
  4. Bentolila, Samuel & Cahuc, Pierre & Dolado, Juan J. & Le Barbanchon, Thomas, 2010. "Two-Tier Labor Markets in the Great Recession: France vs. Spain," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8152, C.E.P.R. Discussion Papers.
  5. Steffen Ahrens & Dennis Wesselbaum, 2009. "On the Introduction of Firing Costs," Kiel Working Papers, Kiel Institute for the World Economy 1559, Kiel Institute for the World Economy.
  6. Ratner, David, 2013. "Unemployment Insurance Experience Rating and Labor Market Dynamics," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2013-86, Board of Governors of the Federal Reserve System (U.S.).
  7. Dennis Wesselbaum, 2009. "Firing Costs in a New Keynesian Model with Endogenous Separations," Kiel Working Papers, Kiel Institute for the World Economy 1550, Kiel Institute for the World Economy.
  8. Cahuc, Pierre & Charlot, Olivier & Malherbet, Franck, 2012. "Explaining the Spread of Temporary Jobs and its Impact on Labor Turnover," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8864, C.E.P.R. Discussion Papers.
  9. 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.
  10. Jean-Baptiste Michau, 2012. "Optimal labor market policy with search frictions and risk-averse workers," Working Papers, HAL hal-00757173, HAL.
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  12. Julien Albertini & Xavier Fairise, 2013. "Search frictions, real wage rigidities and the optimal design of unemployment insurance," TEPP Working Paper, TEPP 2013-07, TEPP.
  13. Saltari, Enrico & Tilli, Riccardo, 2009. "The role and significance of endogenous firing costs in a matching model with endogenous job destruction," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 38(5), pages 799-808, October.
  14. Julien Albertini & Xavier Fairise, 2009. "Optimal unemployment benefit financing scheme : A transatlantic comparison," Documents de recherche, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne 09-01, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.

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