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Assesing the Political Viability of Labour Market Reform: The Case of Employment Protection

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Author Info
Gilles Saint Paul

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Abstract

We analyze the political support for employment protection legislation. Unlike my previous work on the same topic, this paper pays a lot of attention to the role of obsolescence in the growth process. In voting in favour of employment protection, incumbent employees trade off lower living standards (because employment protection maintains workers in less productive activities) against longer job duration. The support for employment protection will then depend on the value of the latter relative to the cost of the former. We highlight two key deeterminants of this trade-off: first, the workers' bargaining power, second, the economy's growth rate-more precisely its rate of creative destruction.

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Publisher Info
Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 346.

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Date of creation: Dec 1998
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Handle: RePEc:upf:upfgen:346

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Web page: http://www.econ.upf.edu/

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Related research
Keywords: Vintage capital; obsolescence; political economy; firing costs; creative destruction;

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Find related papers by JEL classification:
E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
J6 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies

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  1. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Blackwell Publishing, vol. 57(3), pages 381-402, July. [Downloadable!] (restricted)
  2. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Blackwell Publishing, vol. 61(3), pages 397-415, July. [Downloadable!] (restricted)
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  3. Daniel Cohen & Arnaud Lefranc & Gilles Saint-Paul, 1997. "French unemployment: a transatlantic perspective," Economic Policy, CEPR, CES, MSH, vol. 12(25), pages 265-292, October. [Downloadable!] (restricted)
  4. Olivier Blanchard & Pedro Portugal, 1998. "What Hides Behind an Umemployment Rate: Comparing Portuguese and U.S. Unemployment," NBER Working Papers 6636, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Caballero, Ricardo J & Hammour, Mohamad L, 1994. "The Cleansing Effect of Recessions," American Economic Review, American Economic Association, vol. 84(5), pages 1350-68, December. [Downloadable!] (restricted)
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  1. Tito Boeri & J. Ignacio Conde-Ruiz & Vincenzo Galasso, . "Cross-skill Redistribution and the Tradeoff between Unemployment Benefits and Employment Protection," Working Papers 2004-26, FEDEA. [Downloadable!]
    Other versions:
  2. Tito Boeri & J. Ignacio Conde-Ruiz & Vincenzo Galasso, . "Protecting Against Labour Market Risk: Employment Protection or Unemployment Benefits?," Working Papers 2003-17, FEDEA. [Downloadable!]
    Other versions:
  3. Alberto Alesina & Silvia Ardagna & Vincenzo Galasso, 2008. "The Euro and Structural Reforms," Working Papers 344, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
    Other versions:
  4. Luca Nunziata & Stefano Staffolani, 2001. "On Short-Term Contracts Regulations," Economics Papers 2001-W7, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
    Other versions:
  5. Tito Boeri & J. Ignacio Conde-Ruiz & Vincenzo Galasso, 2006. "The Political Economy of Flexicurity," Working Papers 2006-15, FEDEA. [Downloadable!]
  6. Andrea Vindigni, 2002. "Uncertainty and the Politics of Employment Protection," Working Papers 844, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
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