IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Employment protection reform in search economies

  • L'Haridon, Olivier
  • Malherbet, Franck

The design of employment protection legislation (EPL) is of particular importance in the European debate on the contours of labor-market reform. In this article we appeal to an equilibrium unemployment model to investigate the virtues of EPL reform which reduces the red tape and legal costs associated with layoffs and introduces a U.S.-style experience-rating system, which we model as a combination of a layoff tax and a payroll subsidy. The reform considered shows that it is possible to improve the efficiency of employment protection policies without affecting the extent of worker protection on the labor market. These results are consistent with the conventional wisdom that experience rating is desirable, not only as an integral component of unemployment-compensation finance, as most studies acknowledge, but also as part and parcel of a virtuous EPL system.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/B6V64-4SSND82-1/2/4f771a50bfcd5cf1c1f6c2e5049517fd
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 53 (2009)
Issue (Month): 3 (April)
Pages: 255-273

as
in new window

Handle: RePEc:eee:eecrev:v:53:y:2009:i:3:p:255-273
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Holmlund, Bertil, 1998. " Unemployment Insurance in Theory and Practice," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 113-41, March.
  2. Margolis, D. & Fougere, D., 1999. "Moduler les cotisations employeurs a l'assurance - chomage: les experiences de bonus - malus aux Etats-Unis," Papiers d'Economie Mathématique et Applications 1999.22, Université Panthéon-Sorbonne (Paris 1).
  3. Gilles Saint Paul, 1999. "The political economy of employment protection," Economics Working Papers 355, Department of Economics and Business, Universitat Pompeu Fabra.
  4. Julia Fath & Clemens Fuest, 2005. "Experience Rating versus Employment Protection Laws in a Model where Firms Monitor Workers," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(2), pages 299-314, 06.
  5. Yashiv, Eran, 2006. "Evaluating the Performance of the Search and Matching Model," IZA Discussion Papers 1931, Institute for the Study of Labor (IZA).
  6. Cahuc, Pierre & Zylberberg, André, 2008. "Optimum income taxation and layoff taxes," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 2003-2019, October.
  7. Mortensen, Dale T & Pissarides, Christopher, 1999. "New Developments in Models of Search in the Labour Market," CEPR Discussion Papers 2053, C.E.P.R. Discussion Papers.
  8. Dale T. Mortensen, 2005. "More on Unemployment and Vacancy Fluctuations," 2005 Meeting Papers 326, Society for Economic Dynamics.
  9. Ch. Pissarides., 2011. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 1.
  10. Gomes, Joao & Greenwood, Jeremy & Rebelo, Sergio, 2001. "Equilibrium unemployment," Journal of Monetary Economics, Elsevier, vol. 48(1), pages 109-152, August.
  11. Petrongolo, Barbara & Pissarides, Christopher, 2000. "Looking Into The Black Box: A Survey Of The Matching Function," CEPR Discussion Papers 2409, C.E.P.R. Discussion Papers.
  12. Richard Duhautois, 2002. "Les réallocations d'emplois en France sont-elles en phase avec le cycle ?," Économie et Statistique, Programme National Persée, vol. 351(1), pages 87-103.
  13. Pierre Cahuc & André Zylberberg, 1999. "Job Protection, Minimum Wage and Unemployment," Working Papers 99-38, Centre de Recherche en Economie et Statistique.
  14. Topel, Robert & Welch, Finis, 1980. "Unemployment Insurance: Survey and Extensions," Economica, London School of Economics and Political Science, vol. 47(187), pages 351-79, August.
  15. Cahuc, Pierre & Postel-Vinay, Fabien, 2002. "Temporary jobs, employment protection and labor market performance," Labour Economics, Elsevier, vol. 9(1), pages 63-91, February.
  16. Katherine Baicker & Claudia Goldin & Lawrence F. Katz, 1998. "A Distinctive System: Origins and Impact of U.S. Unemployment Compensation," NBER Chapters, in: The Defining Moment: The Great Depression and the American Economy in the Twentieth Century, pages 227-264 National Bureau of Economic Research, Inc.
  17. Giuseppe BERTOLA & Tito BOERI & Sandrine CAZES, 2000. "Employment protection in industrialized countries: The case for new indicators," International Labour Review, International Labour Organization, vol. 139(1), pages 57-72, 03.
  18. Giuseppe Bertola, 2004. "A Pure Theory of Job Security and Labour Income Risk," Review of Economic Studies, Oxford University Press, vol. 71(1), pages 43-61.
  19. Anderson, Patricia M, 1993. "Linear Adjustment Costs and Seasonal Labor Demand: Evidence from Retail Trade Firms," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 1015-42, November.
  20. Pierre Cahuc & Franck Malherbet, 2001. "Unemployment Compensation Finance and Labor Market Rigidity," Working Papers 2001-37, Centre de Recherche en Economie et Statistique.
  21. Anderson, Patricia M. & Meyer, Bruce D., 2000. "The effects of the unemployment insurance payroll tax on wages, employment, claims and denials," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 81-106, October.
  22. Card, David & Levine, Phillip B., 1994. "Unemployment insurance taxes and the cyclical and seasonal properties of unemployment," Journal of Public Economics, Elsevier, vol. 53(1), pages 1-29, January.
  23. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "Job reallocation, employment fluctuations and unemployment," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 18, pages 1171-1228 Elsevier.
  24. Olivier J. Blanchard & Jean Tirole, 2008. "The Joint Design of Unemployment Insurance and Employment Protection: A First Pass," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 45-77, 03.
  25. Denis Fougère & David Margolis, 2000. "Moduler les cotisations employeurs à l’assurance chômage : les expériences de bonus-malus aux Etats-Unis," Working Papers 2000-16, Centre de Recherche en Economie et Statistique.
  26. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  27. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  28. Robert E. Hall & Paul R. Milgrom, 2007. "The Limited Influence of Unemployment on the Wage Bargain," Levine's Bibliography 321307000000000135, UCLA Department of Economics.
  29. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, August.
  30. Fernando Alvarez & Marcelo Veracierto, 1999. "Labor market policies in an equilibrium search model," Working Paper Series WP-99-10, Federal Reserve Bank of Chicago.
  31. Pietro Garibaldi & Giovanni L. Violante, 2005. "The Employment Effects of Severance Payments with Wage Rigidities," Economic Journal, Royal Economic Society, vol. 115(506), pages 799-832, October.
  32. Steeve Mongrain & Joanne Roberts, 2005. "Unemployment Insurance And Experience Rating: Insurance Versus Efficiency ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(4), pages 1303-1319, November.
  33. Saint-Paul, Gilles, 2004. "Why are European Countries Diverging in their Unemployment Experience?," IDEI Working Papers 269, Institut d'Économie Industrielle (IDEI), Toulouse.
  34. Olivier L'Haridon & Franck Malherbet, 2003. "Protection de l’emploi et performance du marché du travail," Working Papers 2003-19, Centre de Recherche en Economie et Statistique.
  35. Christopher A. Pissarides, 1992. "Search Unemployment with on-the-job Search," CEP Discussion Papers dp0074, Centre for Economic Performance, LSE.
  36. Pierre Cahuc & André Zylberberg, 2004. "Labor Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 026203316x, August.
  37. Harold L. Cole & Richard Rogerson, 1996. "Can the Mortonson-Pissarides matching model match the business cycle facts?," Staff Report 224, Federal Reserve Bank of Minneapolis.
  38. Kramarz, Francis & Michaud, Marie-Laure, 2003. "The Shape of Hiring and Separation Costs," CEPR Discussion Papers 3685, C.E.P.R. Discussion Papers.
  39. Richard Rogerson & Robert Shimer & Randall Wright, 2004. "Search-Theoretic Models of the Labor Market-A Survey," NBER Working Papers 10655, National Bureau of Economic Research, Inc.
  40. Feldstein, Martin S, 1976. "Temporary Layoffs in the Theory of Unemployment," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 937-57, October.
  41. Albrecht, James W & Vroman, Susan B, 1999. "Unemployment Compensation Finance and Efficiency Wages," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 141-67, January.
  42. Burdett, Kenneth & Wright, Randall, 1989. "Optimal firm size, taxes, and unemployment," Journal of Public Economics, Elsevier, vol. 39(3), pages 275-287, August.
  43. Garey Ramey & Wouter J. den Haan & Joel Watson, 2000. "Job Destruction and Propagation of Shocks," American Economic Review, American Economic Association, vol. 90(3), pages 482-498, June.
  44. Dominique Goux & Eric Maurin, 2000. "Labor Market Institutions and Job Stability. A Firm-Level Analysis of Layoff Risk for High and Low-Seniority Workers," Working Papers 2000-29, Centre de Recherche en Economie et Statistique.
  45. Rocheteau, Guillaume, 1999. "Balanced-Budget Rules and Indeterminacy of the Equilibrium Unemployment Rate," Oxford Economic Papers, Oxford University Press, vol. 51(3), pages 399-409, July.
  46. Richard Layard, 2006. "Happiness and Public Policy: a Challenge to the Profession," Economic Journal, Royal Economic Society, vol. 116(510), pages C24-C33, 03.
  47. Dominique Goux & Eric Maurin, 2000. "Labor Market Institutions and Job Stability. A Firm-Level Analysis of Layoff Risk for High and Low-Seniority Workers," Working Papers 2000-29, Centre de Recherche en Economie et Statistique.
  48. MacLeod, W Bentley & Malcomson, James M, 1993. "Investments, Holdup, and the Form of Market Contracts," American Economic Review, American Economic Association, vol. 83(4), pages 811-37, September.
  49. Pissarides, Christopher A., 2001. "Employment protection," Labour Economics, Elsevier, vol. 8(2), pages 131-159, May.
  50. Feve, Patrick & Langot, Francois, 1996. "Unemployment and the business cycle in a small open economy: G.M.M. estimation and testing with French data," Journal of Economic Dynamics and Control, Elsevier, vol. 20(9-10), pages 1609-1639.
  51. Garibaldi, Pietro & Wasmer, Etienne, 2001. "Labor Market Flows and Equilibrium Search Unemployment," IZA Discussion Papers 406, Institute for the Study of Labor (IZA).
  52. repec:fth:inseep:9938 is not listed on IDEAS
  53. Davis, Steven J. & Haltiwanger, John, 1999. "Gross job flows," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 41, pages 2711-2805 Elsevier.
  54. Marceau, Nicolas, 1993. "Unemployment insurance and market structure," Journal of Public Economics, Elsevier, vol. 52(2), pages 237-249, September.
  55. Olivier Blanchard & Augustin Landier, 2001. "The Perverse Effects of Partial Labor Market Reform: Fixed Duration Contracts in France," NBER Working Papers 8219, National Bureau of Economic Research, Inc.
  56. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
  57. Freund, Caroline & Ozden, Caglar, 2004. "Loss aversion and trade policy," Policy Research Working Paper Series 3385, The World Bank.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:53:y:2009:i:3:p:255-273. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.