Employment Protection and the Incidence of Unemployment: A Theoretical Framework
The present paper aims to analyse the effects of employment protection on a heterogeneous labour force. To this end, a standard matching model with employment protection has been extended to allow for the existence of two types of workers differing from each other only in the probability of becoming less productive while holding a job. In working out the model it turns out that in equilibrium workers with a relatively higher probability of becoming less productive face both a higher turnover and a longer duration of unemployment. Therefore, employment protection here raises the unemployment rate of this worker category, a result which looks consistent with consolidated evidence but contrasts with standard theoretical results. Copyright 2004, CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd.
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Volume (Year): 18 (2004)
Issue (Month): 1 (March)
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