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Age-Dependent Employment Protection

Author

Listed:
  • Arnaud Chéron

    (GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Le Mans Université)

  • Jean-Olivier Hairault

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, IZA - Institute for the Study of Labor)

  • François Langot

    (IZA - Institute for the Study of Labor, GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Le Mans Université, CEPREMAP - Centre pour la recherche économique et ses applications - ECO ENS-PSL - Département d'économie de l'ENS-PSL - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres)

Abstract

This paper examines the age-related design of firing taxes by extending the theory of job creation and job destruction to account for a finite working life-time. We first argue that the potential employment gains related to employment protection are high for older workers, as they are magnified by the proximity to retirement. But higher firing taxes for these workers increase job destruction rates for the younger generations. Furthermore, from a normative standpoint, when firms cannot ex-ante age-direct their search, the impact of each generation of unemployed workers on the average return on vacancies makes the internalization of the search costs for the other generations imperfect through the ex-post Nash bargaining process. We show that the first best age-profile of firing taxes is typically hump-shaped, partially in contradiction with existing policies in some European countries. Taking into account the fact that the human capital of older workers is more specific than general tends to exacerbate these results.

Suggested Citation

  • Arnaud Chéron & Jean-Olivier Hairault & François Langot, 2011. "Age-Dependent Employment Protection," PSE-Ecole d'économie de Paris (Postprint) hal-00623282, HAL.
  • Handle: RePEc:hal:pseptp:hal-00623282
    DOI: 10.1111/j.1468-0297.2011.02453.x
    Note: View the original document on HAL open archive server: https://hal.science/hal-00623282
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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