IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Employment protection and the stock market: The common shock case

Author Info

Listed author(s):
  • Hénin, Pierre-Yves
  • Weitzenblum, Thomas

Abstract

This paper considers the consequences of employment protection with a fully diversified stock market when firms face a common shock. The analysis focuses on the interaction between employment protection and stock market when wages are sluggish or fixed. We build and calibrate a dynamic model where firms decide upon capital utilization, investment, vacancy posting and lay-offs in order to maximize shareholder value. Public policy, devoted to employment protection, is parametrized through firing costs. Due to the capital and employment irreversibilities, the model has to be solved using numerical techniques. Two series of scenarii are presented, first considering the effect of alternative level of firing costs i a benchmark economy, thus examining interactions between firing cost and successively, i) higher market price of risk, ii) higher separation rates, iii) fixed wages, iv) fixed capital utilization.

Download Info

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.

File URL: http://www.cepremap.fr/depot/couv_orange/co0306.pdf
Download Restriction: no

Paper provided by CEPREMAP in its series CEPREMAP Working Papers (Couverture Orange) with number 0306.

as
in new window

Length: 27 pages
Date of creation: 2003
Handle: RePEc:cpm:cepmap:0306
Contact details of provider: Postal:
48 boulevard Jourdan - 75014 PARIS

Phone: +33(0) 1 43 13 62 30
Fax: +33(0) 1 43 13 62 32
Web page: http://www.cepremap.fr/

More information through EDIRC

Keywords:

Other versions of this item:

Find related papers by JEL classification:
  • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
  • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

This paper has been announced in the following NEP Reports:

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.:

as
in new window


  1. Yu-Fu Chen & Dennis Snower & Gylfi Zoega, 2003. "Labour-market Institutions and Macroeconomic Shocks," LABOUR, CEIS, vol. 17(2), pages 247-270, 06.
  2. Robert E. Hall, 2001. "The Stock Market and Capital Accumulation," American Economic Review, American Economic Association, vol. 91(5), pages 1185-1202, December.
  3. Bertola, Giuseppe & Rogerson, Richard, 1997. "Institutions and labor reallocation," European Economic Review, Elsevier, vol. 41(6), pages 1147-1171, June.
  4. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-938, October.
  5. Luca Nunziata, 2002. "Unemployment, Labour Market Institutions and Shocks," Economics Papers 2002-W16, Economics Group, Nuffield College, University of Oxford.
  6. Krusell, Per & Smith, Anthony A., 1997. "Income And Wealth Heterogeneity, Portfolio Choice, And Equilibrium Asset Returns," Macroeconomic Dynamics, Cambridge University Press, vol. 1(02), pages 387-422, June.
  7. Garey Ramey & Wouter J. den Haan & Joel Watson, 2000. "Job Destruction and Propagation of Shocks," American Economic Review, American Economic Association, vol. 90(3), pages 482-498, June.
  8. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
  9. Lars Ljungqvist, 2002. "How Do Lay--off Costs Affect Employment?," Economic Journal, Royal Economic Society, vol. 112(482), pages 829-853, October.
  10. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-417, June.
  11. Ravi Jagannathan & Zhenyu Wang, 2002. "Empirical Evaluation of Asset-Pricing Models: A Comparison of the SDF and Beta Methods," Journal of Finance, American Finance Association, vol. 57(5), pages 2337-2367, October.
  12. Burda, Michael C, 1992. " A Note on Firing Costs and Severance Benefits in Equilibrium Unemployment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(3), pages 479-489.
  13. Ambler, Steve & Paquet, Alain, 1994. "Stochastic Depreciation and the Business Cycle," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(1), pages 101-116, February.
  14. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-132, March.
  15. 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.
  16. Campbell, John Y., 1999. "Asset prices, consumption, and the business cycle," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 19, pages 1231-1303 Elsevier.
  17. Jean-Paul Fitoussi & David Jestaz & Edmund S. Phelps & Gylfi Zoega, 2000. "Roots of the Recent Recoveries: Labor Reforms or Private Sector Forces?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 237-311.
  18. John Y. Campbell & John H. Cochrane, 2000. "Explaining the Poor Performance of Consumption-based Asset Pricing Models," Journal of Finance, American Finance Association, vol. 55(6), pages 2863-2878, December.
  19. Lettau, Martin & Uhlig, Harald, 2002. "The Sharpe Ratio And Preferences: A Parametric Approach," Macroeconomic Dynamics, Cambridge University Press, vol. 6(02), pages 242-265, April.
  20. Shi, Shouyong & Wen, Quan, 1997. "Labor market search and capital accumulation: Some analytical results," Journal of Economic Dynamics and Control, Elsevier, vol. 21(10), pages 1747-1776, August.
  21. Jermann, Urban J., 1998. "Asset pricing in production economies," Journal of Monetary Economics, Elsevier, vol. 41(2), pages 257-275, April.
  22. Edward P. Lazear, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 699-726.
  23. Harvey, Campbell R, 1991. " The World Price of Covariance Risk," Journal of Finance, American Finance Association, vol. 46(1), pages 111-157, March.
  24. Xavier Fairise & Pierre-Yves Hénin & François Langot, 1992. "Les modèles de cycle réel peuvent-ils expliquer les fluctuations de l'emploi et de la productivité ?," Économie et Prévision, Programme National Persée, vol. 106(5), pages 23-40.
  25. Edmund Phelps & Gylfi Zoega, 2001. "Structural booms," Economic Policy, CEPR;CES;MSH, vol. 16(32), pages 83-126, 04.
Full references (including those not matched with items on IDEAS)

The CitEc project has not yet found citations to this item.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Access and download statistics

When requesting a correction, please mention this item's handle: RePEc:cpm:cepmap:0306. 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: (Stéphane Adjemian)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.