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On the evasion of employment protection legislation

Listed author(s):
  • Baumann, Florian
  • Friehe, Tim

This paper analyzes how the option to evade employment protection legislation impacts on unemployment. Using a stylized model, it is established that the level of unemployment is non-monotonous in the degree of strictness with which employment protection legislation is enforced. Considering just cause and social criteria requirements for three regulatory regimes representative of a large number of industrialized countries, we find that different regimes generate different dismissal decisions only if the regimes are strictly enforced. In contrast, unemployment rates may differ across regimes even in the case of weak enforcement. Additionally, we find that it may be worse for the economy to weakly enforce harmful regulations than to strictly enforce them.

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File URL: http://www.sciencedirect.com/science/article/pii/S0927537111000662
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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 19 (2012)
Issue (Month): 1 ()
Pages: 9-17

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Handle: RePEc:eee:labeco:v:19:y:2012:i:1:p:9-17
DOI: 10.1016/j.labeco.2011.06.005
Contact details of provider: Web page: http://www.elsevier.com/locate/labeco

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  1. Wasmer, Etienne, 2006. "The Economics of Prozac (Do Employees Really Gain from Strong Employment Protection?)," CEPR Discussion Papers 5991, C.E.P.R. Discussion Papers.
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