The Impact of Firing Restrictions on Labour Market Equilibrium in the Presence of On‐the‐job Search
Job-to-job turnover provides a way for employers to escape statutory firing costs, as unprofitable workers may willfully quit their job on receiving an outside offer, or may be induced to accept one that they would otherwise reject with a negotiated severance package. We formalise those mechanisms within an extension of the Diamond–Mortensen–Pissarides model that allows for employed job search. We find that our model explains why higher firing costs intensify job-to-job turnover at the expense of transitions out of unemployment and that ignoring on-the-job Search leads one to overstate the adverse impact of firing costs on employment.
(This abstract was borrowed from another version of this item.)
Volume (Year): 124 (2014)
Issue (Month): 575 (03)
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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.:
- 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.
- Adriana D. Kugler & Gilles Saint-Paul, 2004. "How Do Firing Costs Affect Worker Flows in a World with Adverse Selection?," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 553-584, July.
- Fella, Giulio, 2007. "When do firing taxes matter?," Economics Letters, Elsevier, vol. 97(1), pages 24-31, October.
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