An essay on the generational effect of employment protection
This paper provides an explanation for the observed positive relationship between youth unemployment and the cost of firing workers. When the cost of firing workers is high, firms only fire when the present discounted value of future losses is high, in which case they gain little by postponing the firing decision in the hope that productivity will recover. The young workers are then the first to go due to their longer remaining tenure. In contrast, when the cost of firing workers is low, the present discounted value of future losses is small at the firing margin and firms may choose to wait in the hope of a recovery. In this case they may choose to fire the older workers first since the younger ones are more likely to be around when productivity recovers.
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.
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.
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.:
- Chen, Yu-Fu & Snower, Dennis J. & Gylfi, Zoega, 1999.
"Firing Costs: Eurosclerosis or Eurosuccesses?,"
HWWA Discussion Papers
78, Hamburg Institute of International Economics (HWWA).
- Abel, Andrew B & Eberly, Janice C, 1994.
"A Unified Model of Investment under Uncertainty,"
American Economic Review,
American Economic Association, vol. 84(5), pages 1369-84, December.
- Andrew B. Abel & Janice C. Eberly, 1993. "A Unified Model of Investment Under Uncertainty," NBER Working Papers 4296, National Bureau of Economic Research, Inc.
- Andrew B. Abel & Janice C. Eberly, . "A Unified Model of Investment Under Uncertainty," Rodney L. White Center for Financial Research Working Papers 14-93, Wharton School Rodney L. White Center for Financial Research.
- Bertola, Giuseppe & Blau, Francine D & Kahn, Lawrence, 2002.
"Labour Market Institutions and Demographic Employment Patterns,"
CEPR Discussion Papers
3448, C.E.P.R. Discussion Papers.
- Giuseppe Bertola & Francine Blau & Lawrence Kahn, 2007. "Labor market institutions and demographic employment patterns," Journal of Population Economics, Springer;European Society for Population Economics, vol. 20(4), pages 833-867, October.
- Giuseppe Bertola & Francine D. Blau & Lawrence M. Kahn, 2002. "Labor Market Institutions and Demographic Employment Patterns," NBER Working Papers 9043, National Bureau of Economic Research, Inc.
- James L. Paddock & Daniel R. Siegel & James L. Smith, 1988. "Option Valuation of Claims on Real Assets: The Case of Offshore Petroleum Leases," The Quarterly Journal of Economics, Oxford University Press, vol. 103(3), pages 479-508.
- Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
- Murphy, Kevin M & Welch, Finis, 1990. "Empirical Age-Earnings Profiles," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 202-29, April.
- Robert C. Merton, 1973. "Theory of Rational Option Pricing," Bell Journal of Economics, The RAND Corporation, vol. 4(1), pages 141-183, Spring.
- Geske, Robert, 1979. "A note on an analytical valuation formula for unprotected American call options on stocks with known dividends," Journal of Financial Economics, Elsevier, vol. 7(4), pages 375-380, December.
- Olivier Blanchard, 2006.
"European unemployment: the evolution of facts and ideas,"
CEPR;CES;MSH, vol. 21(45), pages 5-59, 01.
- Olivier Blanchard, 2005. "European Unemployment: The Evolution of Facts and Ideas," NBER Working Papers 11750, National Bureau of Economic Research, Inc.
- Juan F. Jimeno & Diego Rodríguez-Palenzuela, 2003.
"Youth Unemployment in the OECD: Demographic Shifts, Labour Market Institutions and Macroeconomic Shocks,"
Economics Working Papers
019, European Network of Economic Policy Research Institutes.
- Juan F. Jimeno & Diego Rodríguez-Palenzuela, . "Youth unemployment in the OECD: Demographic shifts, labour market institutions, and macroeconomic shocks," Working Papers 2002-15, FEDEA.
- Jimeno, Juan F. & Rodriguez-Palenzuela, Diego, 2002. "Youth unemployment in the OECD: demographic shifts, labour market institutions, and macroeconomic shocks," Working Paper Series 0155, European Central Bank.
- Chen, Yu-Fu & Zoega, Gylfi, 1999. "On the effectiveness of firing costs1," Labour Economics, Elsevier, vol. 6(3), pages 335-354, September.
- Lazear, Edward P & Rosen, Sherwin, 1981.
"Rank-Order Tournaments as Optimum Labor Contracts,"
Journal of Political Economy,
University of Chicago Press, vol. 89(5), pages 841-64, October.
- Stephen Nickell & Luca Nunziata & Wolfgang Ochel, 2005. "Unemployment in the OECD Since the 1960s. What Do We Know?," Economic Journal, Royal Economic Society, vol. 115(500), pages 1-27, 01.
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
- Robert McDonald & Daniel Siegel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, Oxford University Press, vol. 101(4), pages 707-727.
- Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005.
"Unemployment: Macroeconomic Performance and the Labour Market,"
Oxford University Press, number 9780199279173, December.
- Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345, December.
- Brennan, Michael J. & Schwartz, Eduardo S., 1978. "Finite Difference Methods and Jump Processes Arising in the Pricing of Contingent Claims: A Synthesis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 13(03), pages 461-474, September.
- Edward P. Lazear, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 699-726.
- Samuel Bentolila & Giuseppe Bertola, 1990. "Firing Costs and Labour Demand: How Bad is Eurosclerosis?," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 381-402.
- Whaley, Robert E., 1981. "On the valuation of American call options on stocks with known dividends," Journal of Financial Economics, Elsevier, vol. 9(2), pages 207-211, June.
- Nickell, Stephen, 1998. "Unemployment: Questions and Some Answers," Economic Journal, Royal Economic Society, vol. 108(448), pages 802-16, May.
When requesting a correction, please mention this item's handle: RePEc:eee:matsoc:v:59:y:2010:i:3:p:349-359. 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: (Shamier, Wendy)
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.