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Unemployment and employment protection in a unionized economy with search frictions

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  • Stähler, Nikolai

Abstract

In theoretical literature, the effects of employment protection on unemployment are ambiguous. Higher employment protection decreases job creation as well as job destruction. However, in most models, wages are bargained individually between workers and firms. Using a conventional matching model in which a monopoly union sets wages, I show that employment protection can unambiguously increase unemployment. Interestingly, I find that tightening the restrictions on redundancies and dismissals may even increase the probability of dismissal.

Suggested Citation

  • Stähler, Nikolai, 2007. "Unemployment and employment protection in a unionized economy with search frictions," Discussion Paper Series 1: Economic Studies 2007,04, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdp1:5558
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    References listed on IDEAS

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    1. Laszlo Goerke & Markus Pannenberg & Heinrich Ursprung, 2010. "A positive theory of the earnings relationship of unemployment benefits," Public Choice, Springer, vol. 145(1), pages 137-163, October.
    2. Hashem Pesaran & Davide Pettenuzzo & Allan Timmermann, 2007. "Learning, Structural Instability, and Present Value Calculations," Econometric Reviews, Taylor & Francis Journals, vol. 26(2-4), pages 253-288.
    3. Gabriel Felbermayr & Julien Prat, 2011. "Product Market Regulation, Firm Selection, And Unemployment," Journal of the European Economic Association, European Economic Association, vol. 9(2), pages 278-317, April.
    4. Winfried Koeniger & Julien Prat, 2007. "Employment Protection, Product Market Regulation and Firm Selection," Economic Journal, Royal Economic Society, vol. 117(521), pages 302-332, June.
    5. Leonor Modesto, 2008. "Unions, Firing Costs, and Unemployment," LABOUR, CEIS, vol. 22(3), pages 509-546, September.
    6. Strotmann, Harald & Döpke, Jörg & Buch, Claudia M., 2006. "Does trade openness increase firm-level volatility?," Discussion Paper Series 1: Economic Studies 2006,40, Deutsche Bundesbank.
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    Cited by:

    1. Yerrabati, Sridevi, 2022. "Does vulnerable employment alleviate poverty in developing countries?," Economic Modelling, Elsevier, vol. 116(C).
    2. Makoto Masui, 2013. "Temporary Contracts, Employment Protection, and Collective Bargaining," LABOUR, CEIS, vol. 27(4), pages 371-398, December.
    3. Moser, Christoph & Stähler, Nikolai, 2009. "Spillover effects of minimum wages in a two-sector search model," Discussion Paper Series 1: Economic Studies 2009,01, Deutsche Bundesbank.

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    More about this item

    Keywords

    employment protection; search and matching models; unemployment; unions;
    All these keywords.

    JEL classification:

    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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