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Age-Design Employment Protection

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  • Arnaud Chéron

    (University of Maine (GAINS-TEPP) and EDHEC)

Abstract

extending the theory of job creation and job destruction to account for a finite working life-time. We first argue that the potential employment gains related to employment protection is large for older workers, but higher firing taxes for these workers increase job destruction rates of younger generations. On the contrary, age-decreasing firing taxes can account for lower job destruction rates at all ages. Furthermore, from a normative standpoint, because firings of older (younger) workers exert a negative (positive) externality on the matching process, we find that the first best age-dynamics of firing taxes and hiring subsidies is typically hump-shaped. Taking into account distortions related to unemployment benefits and bargaining power shows the robustness of this result, in contradiction with what is done in most OECD countries.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2009 Meeting Papers with number 641.

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Date of creation: 2009
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Handle: RePEc:red:sed009:641

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  1. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  2. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  3. Chéron, Arnaud & Hairault, Jean-Olivier & Langot, François, 2011. "Life Cycle Equilibrium Unemployment," CEPREMAP Working Papers (Docweb) 1103, CEPREMAP.
  4. Moen, E.R., 1995. "Competitive Search Equilibrium," Memorandum 37/1995, Oslo University, Department of Economics.
  5. Luc Behaghel & Bruno Crépon & Béatrice Sédillot, 2008. "The perverse effects of partial employment protection reform: the case of French older workers," Working Papers 23397, Institut National de la Recherche Agronomique, France.
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