Welfare improving employment protection
AbstractThis paper derives new results on the welfare effects of employment protection. Using data from 17 OECD countries, we show that there exists an inverse U-shape relationship between employment protection and economic growth. Using a simple theoretical model with non-contractible specific investments, we show that over some range increasing employment protection does indeed raise welfare. We also show that the optimal level of employment protection depends on other labour market features, such as the bargaining power of workers and the existence of wage rigidities like the minimum wage. Copyright (c) The London School of Economics and Political Science 2007.
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Bibliographic InfoPaper provided by Tilburg University in its series Open Access publications from Tilburg University with number urn:nbn:nl:ui:12-194309.
Date of creation: 2007
Date of revision:
Publication status: Published in Economica (2007) v.74, p.381-396
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Web page: http://www.tilburguniversity.edu/
Other versions of this item:
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
- J8 - Labor and Demographic Economics - - Labor Standards
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