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Employment protection: Tough to scrap or tough to get?

  • Björn Brügemann

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.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0297.2007.02061.x
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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 117 (2007)
Issue (Month): 521 (06)
Pages: 386-415

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Handle: RePEc:ecj:econjl:v:117:y:2007:i:521:p:386-415
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  1. Torsten Persson & Guido Tabellini, . "Political Economics and Macroeconomic Policy," Working Papers 121, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  2. 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.
  3. Daron Acemoglu & Joshua Angrist, 1998. "Consequences of Employment Protection? The Case of the Americans with Disabilities Act," NBER Working Papers 6670, National Bureau of Economic Research, Inc.
  4. Algan, Yann & Cahuc, Pierre, 2004. "Job Protection: The Macho Hypothesis," IZA Discussion Papers 1192, Institute for the Study of Labor (IZA).
  5. repec:spo:wpecon:info:hdl:2441/8807 is not listed on IDEAS
  6. Christine Jolls & J.J. Prescott, 2004. "Disaggregating Employment Protection: The Case of Disability Discrimination," NBER Working Papers 10740, National Bureau of Economic Research, Inc.
  7. 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.
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