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Employment protection: Tough to scrap or tough to get?

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  • Björn Brügemann

Abstract

If legislating employment protection is a protracted process subject to time delays, then firms can dismiss workers before an increase in protection is implemented. Heightened risk of dismissal before implementation makes workers in countries with flexible labour markets reluctant to support proposals for more stringent protection. In the model developed in this article, this mechanism provides a novel source of "status quo" bias which can sustain differences in employment protection across countries. While in previous work "status quo" bias arises because a constituency effect makes employment protection difficult to deregulate, here the bias arises because protection is difficult to introduce. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.

Suggested Citation

  • Björn Brügemann, 2007. "Employment protection: Tough to scrap or tough to get?," Economic Journal, Royal Economic Society, vol. 117(521), pages 386-415, June.
  • Handle: RePEc:ecj:econjl:v:117:y:2007:i:521:p:386-415
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    References listed on IDEAS

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    1. Gilles Saint-Paul, 2002. "The Political Economy of Employment Protection," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 672-701, June.
    2. Persson, Torsten & Tabellini, Guido, 1999. "Political economics and macroeconomic policy," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 22, pages 1397-1482 Elsevier.
    3. Christine Jolls & J.J. Prescott, 2004. "Disaggregating Employment Protection: The Case of Disability Discrimination," NBER Working Papers 10740, National Bureau of Economic Research, Inc.
    4. Yann Algan & Pierre Cahuc, 2006. "Job Protection: The Macho Hypothesis," Oxford Review of Economic Policy, Oxford University Press, vol. 22(3), pages 390-410, Autumn.
    5. Daron Acemoglu & Joshua D. Angrist, 2001. "Consequences of Employment Protection? The Case of the Americans with Disabilities Act," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 915-957, October.
    6. Pedro Portugal & Olivier Blanchard, 2001. "What Hides Behind an Unemployment Rate: Comparing Portuguese and U.S. Labor Markets," American Economic Review, American Economic Association, vol. 91(1), pages 187-207, March.
    7. repec:spo:wpecon:info:hdl:2441/8807 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Lawrence M. Kahn, 2012. "Labor market policy: A comparative view on the costs and benefits of labor market flexibility," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 31(1), pages 94-110, December.
    2. Ant Bozkaya & William R. Kerr, 2009. "Labor Regulations and European Private Equity," NBER Working Papers 15627, National Bureau of Economic Research, Inc.
    3. Andrea Vindigni & Simone Scotti & Cristina Tealdi, 2015. "Uncertainty and the Politics of Employment Protection," Journal of Labor Economics, University of Chicago Press, vol. 33(1), pages 209-267.
    4. Kahn, Lawrence M., 2007. "Employment Protection Reforms, Employment and the Incidence of Temporary Jobs in Europe: 1995–2001," IZA Discussion Papers 3241, Institute for the Study of Labor (IZA).
    5. repec:ilo:ilowps:486240 is not listed on IDEAS
    6. Salvatori, Andrea, 2010. "Labour contract regulations and workers' wellbeing: International longitudinal evidence," Labour Economics, Elsevier, vol. 17(4), pages 667-678, August.
    7. Acharya, Viral V & Baghai, Ramin & Subramanian, Krishnamurthy, 2009. "Labor Laws and Innovation," CEPR Discussion Papers 7171, C.E.P.R. Discussion Papers.
    8. Goerke, Laszlo & Neugart, Michael, 2015. "Lobbying and dismissal dispute resolution systems," International Review of Law and Economics, Elsevier, vol. 41(C), pages 50-62.
    9. Aleksynska, Mariya. & Schmidt, Alexandra., 2014. "A chronology of employment protection legislation in some selected European countries," ILO Working Papers 994862403402676, International Labour Organization.
    10. Michele Belot, 2007. "Why is Employment Protection Stricter in Europe than in the United States?," Economica, London School of Economics and Political Science, vol. 74(295), pages 397-423, August.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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