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Age-Design Employment Protection

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  • Arnaud Chéron

    (University of Maine (GAINS-TEPP) and EDHEC)

Abstract

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 is large for older workers, but higher firing taxes for these workers increase job destruction rates of younger generations. On the contrary, age-decreasing firing taxes can account for lower job destruction rates at all ages. Furthermore, from a normative standpoint, because firings of older (younger) workers exert a negative (positive) externality on the matching process, we find that the first best age-dynamics of firing taxes and hiring subsidies is typically hump-shaped. Taking into account distortions related to unemployment benefits and bargaining power shows the robustness of this result, in contradiction with what is done in most OECD countries.

Suggested Citation

  • Arnaud Chéron, 2009. "Age-Design Employment Protection," 2009 Meeting Papers 641, Society for Economic Dynamics.
  • Handle: RePEc:red:sed009:641
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    File URL: https://economicdynamics.org/meetpapers/2009/paper_641.pdf
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    References listed on IDEAS

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    1. 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.
    2. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, January.
    3. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
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