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Firm financed training and pareto improving firing taxes

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  • Andrea Ricci
  • Robert Waldmann

Abstract

This paper analyses how the under-investment in firm financed training caused by hold up can justify the introduction of firing taxes in a laissez-faire economy with search frictions and risk neutral agents. In particular, we show two main results. First, the introduction of a firing tax for newly hired workers combined with hiring subsidies, always acts as a Pareto improving policy. Second, with no hiring subsidies, the introduction of a firing tax for the newly hired always increase the welfare of employed while its impact on the welfare of unemployed depends on the returns to training. Hence, policy implications are derived. Copyright Springer International Publishing Switzerland 2015

Suggested Citation

  • Andrea Ricci & Robert Waldmann, 2015. "Firm financed training and pareto improving firing taxes," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 32(2), pages 201-220, August.
  • Handle: RePEc:spr:epolit:v:32:y:2015:i:2:p:201-220
    DOI: 10.1007/s40888-015-0011-1
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    Cited by:

    1. Damiani, Mirella & Pompei, Fabrizio & Ricci, Andrea, 2011. "Temporary job protection and productivity growth in EU economies," MPRA Paper 29698, University Library of Munich, Germany.
    2. Alessio Tomelleri, 2020. "The Role of Temporary Jobs in Explaining Increasing Inequality for Recent Cohorts in Italy," BEMPS - Bozen Economics & Management Paper Series BEMPS71, Faculty of Economics and Management at the Free University of Bozen.

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    More about this item

    Keywords

    Employment protection; Training; Hold-up; Welfare; J41; J63; J8;
    All these keywords.

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J8 - Labor and Demographic Economics - - Labor Standards

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