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Flexicurity in Belgium: A Proposal Based on Economic Principles


  • Cockx, Bart

    () (Ghent University)

  • Van der Linden, Bruno

    () (Université Catholique de Louvain)


The current unemployment insurance and employment protection legislation were set up in an economic environment in which relationships between workers and firms were typically long-lasting and stable. The increasing globalisation of the economy and the rapid technological and organisational changes require more flexibility of both workers and firms leading to career paths which are much more volatile both within and between firms. Current institutions must be therefore urgently reformed to reconcile this new need of more flexibility with that of security for workers. The call for “flexicurity” is not new, but there is no unanimity on the corresponding institutional model it implies. Rather than proposing a reform on the basis of existing institutions abroad, we propose a reform that is explicitly guided by economic principles. In a nutshell, we propose to transform the bulk of the advance notice payments by a unique lay-off contribution, independently of the type of worker (blue or white-collar) and type of contract (temporary or open-ended). A severance payment, less important than the lay-off contribution, is due to cover the psychic cost related to dismissal. In order to make the employer accountable for the costs he imposes on society, the lay-off contribution should be made proportional to the cumulative past earnings since the moment that the worker was hired in the firm. This contribution would be used not only to finance a supplement to the current unemployment benefits, but also, as to make the worker more accountable, to finance active labour market policies for the unemployed. Aside of this scheme, it makes sense to generalise the current scheme of temporary unemployment benefits for blue-collar workers to white-collar workers, but only to the extent that one introduces experience rating in the funding, so that again the employers are made accountable for the social costs that they induce by these temporary lay-offs.

Suggested Citation

  • Cockx, Bart & Van der Linden, Bruno, 2009. "Flexicurity in Belgium: A Proposal Based on Economic Principles," IZA Policy Papers 9, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izapps:pp9

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    References listed on IDEAS

    1. Olivier J. Blanchard & Jean Tirole, 2008. "The Joint Design of Unemployment Insurance and Employment Protection: A First Pass," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 45-77, March.
    2. Cockx, Bart & Van der Linden, Bruno & Karaa, Adel, 1998. "Active Labour Market Policies and Job Tenure," Oxford Economic Papers, Oxford University Press, vol. 50(4), pages 685-708, October.
    3. Olivier Blanchard & Jean Tirole, 2004. "Redesigning the Employment Protection System," De Economist, Springer, vol. 152(1), pages 1-20, March.
    4. repec:ces:ifodic:v:3:y:2005:i:2:p:14567656 is not listed on IDEAS
    5. Hopenhayn, Hugo A & Nicolini, Juan Pablo, 1997. "Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 412-438, April.
    6. Bart Cockx & Muriel Dejemeppe & Bruno Van der Linden, 2007. "Bevordert het Plan voor de begeleiding en opvolging van werklozen de overgang naar werk ?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 4902, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    7. Julia Fath & Clemens Fuest, 2005. "Experience Rating of Unemployment Insurance in the US: A Model for Europe?," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 3(2), pages 45-50, 07.
    8. Pissarides, Christopher A., 2001. "Employment protection," Labour Economics, Elsevier, vol. 8(2), pages 131-159, May.
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    Cited by:

    1. Kjell Erik Lommerud & Odd Rune Straume & Steinar Vagstad, 2012. "Employment protection and unemployment benefits: On technology adoption and job creation in a matching model," NIPE Working Papers 3/2012, NIPE - Universidade do Minho.
    2. Michael Funke & Marc Gronwald, 2009. "A Convex Hull Approach to Counterfactual Analysis of Trade Openness and Growth," CESifo Working Paper Series 2692, CESifo Group Munich.
    3. Cockx, Bart, 2013. "Youth Unemployment in Belgium: Diagnosis and Key Remedies," IZA Policy Papers 66, Institute for the Study of Labor (IZA).
    4. Eichhorst, Werner & Marx, Paul, 2010. "Whatever Works: Dualisation and the Service Economy in Bismarckian Welfare States," IZA Discussion Papers 5035, Institute for the Study of Labor (IZA).

    More about this item


    lexicurity; employment protection; unemployment insurance; active labour market policies; optimal design;

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • 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

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