Employment Protection: The Case of Limited Enforceability
This paper shows that the effects of employment protection critically depend on its enforcement. For this purpose, we capture evasion of employment protection via market exit in a setting of monopolistic competition. We find that the number of firms entering the market depends on firing costs only in the case of imperfect enforcement of employment protection. Furthermore, the possibility to circumvent firing restrictions by exiting the market mitigates the adverse efficiency effects of employment protection and can reverse the sign of the change in employment associated with an increase in firing costs.
|Date of creation:||2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
More information through EDIRC
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.:
- Olivier Blanchard & Francesco Giavazzi, 2001.
"Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets,"
NBER Working Papers
8120, National Bureau of Economic Research, Inc.
- Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects Of Regulation And Deregulation In Goods And Labor Markets," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 879-907, August.
- Olivier Blanchard & Francesco Giavazzi, . "Macroeconomic effects of regulation and deregulation in goods and labor markets," Working Papers 187, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Blanchard, Olivier J & Giavazzi, Francesco, 2001. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labour Markets," CEPR Discussion Papers 2713, C.E.P.R. Discussion Papers.
- Burda, Michael C., 1991. "Monopolistic competition, costs of adjustment, and the behavior of European manufacturing employment," European Economic Review, Elsevier, vol. 35(1), pages 61-79, January.
- Monique Ebell & Christian Haefke, 2002.
"Product market deregulation and labor market outcomes,"
Economics Working Papers
726, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 2003.
- Ebell, Monique & Haefke, Christian, 2003. "Product Market Deregulation and Labor Market Outcomes," IZA Discussion Papers 957, Institute for the Study of Labor (IZA).
- Monique Ebell & Christian Haefke, 2002. "Product Market Deregulation and Labor Market Outcomes," Working Papers 02.08, Swiss National Bank, Study Center Gerzensee.
- Boeri, Tito, 1998.
"Enforcement of Employment Security Regulations, On-The-Job Search and Unemployment Duration,"
CEPR Discussion Papers
1850, C.E.P.R. Discussion Papers.
- Boeri, Tito, 1999. "Enforcement of employment security regulations, on-the-job search and unemployment duration," European Economic Review, Elsevier, vol. 43(1), pages 65-89, January.
- Giuseppe Bertola, 1991.
"Flexibility, Investment, and Growth,"
NBER Working Papers
3864, National Bureau of Economic Research, Inc.
- Dixit, Avinash K & Stiglitz, Joseph E, 1977.
"Monopolistic Competition and Optimum Product Diversity,"
American Economic Review,
American Economic Association, vol. 67(3), pages 297-308, June.
- Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
- José Enrique Galdón Sánchez & Maia Güell, 2001.
"Dismissal conflicts and unemployment,"
Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra
0105, Departamento de Economía - Universidad Pública de Navarra.
- Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
- 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.
- Samaniego, Roberto M., 2006. "Do Firing Costs Affect The Incidence Of Firm Bankruptcy?," Macroeconomic Dynamics, Cambridge University Press, vol. 10(04), pages 467-501, September.
- Olivier Blanchard & Jean Tirole, 2004. "The Optimal Design of Unemployment Insurance and Employment Protection. A First Pass," NBER Working Papers 10443, National Bureau of Economic Research, Inc.
- Michael Neugart & Donald Storrie, 2006. "The emergence of temporary work agencies," Oxford Economic Papers, Oxford University Press, vol. 58(1), pages 137-156, January.
- Richard Martin & Steeve Mongrain & Sean Parkinson, 2004. "Severance Payments and Unemployment Insurance: A Commitment Issue," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(4), pages 593-606, October.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_2346. 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: (Julio Saavedra)
If references are entirely missing, you can add them using this form.