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Employment Protection Regulations and New Hiring

  • Kyota Eguchi

    (Faculty of Economics, University of Tokyo)

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    In the real world, there are various regulations concerned with the dismissal of employees. We consider the effects of dismissal regulations with a simple incomplete labor contract model. Under moral hazard, the existence of a regulation always increases wage level and decreases firms' profits. However, the regulation can improve social welfare if workers' outside option is sufficiently low. Furthermore, we will show that the regulation can enhance new hiring.

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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2000/2000cf88.pdf
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    Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-88.

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    Length: 24 pages
    Date of creation: Aug 2000
    Date of revision:
    Handle: RePEc:tky:fseres:2000cf88
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    1. Emerson, Michael, 1988. "Regulation or deregulation of the labour market : Policy regimes for the recruitment and dismissal of employees in the industrialised countries," European Economic Review, Elsevier, vol. 32(4), pages 775-817, April.
    2. Alan B. Krueger, 1989. "The Evolution of Unjust-Dismissal Legislation in the United States," NBER Working Papers 3127, National Bureau of Economic Research, Inc.
    3. Blanchard, Olivier J. & Summers, Lawrence H., 1987. "Hysteresis in unemployment," European Economic Review, Elsevier, vol. 31(1-2), pages 288-295.
    4. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
    5. Bulow, Jeremy I & Summers, Lawrence H, 1986. "A Theory of Dual Labor Markets with Application to Industrial Policy,Discrimination, and Keynesian Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 4(3), pages 376-414, July.
    6. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
    7. Giuseppe Bertola & Richard Rogerson, 1996. "Institutions and Labor Reallocation," NBER Working Papers 5828, National Bureau of Economic Research, Inc.
    8. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," NBER Working Papers 1950, National Bureau of Economic Research, Inc.
    9. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
    10. Giorgio Brunello, 1992. "The effect of unions on firm performance in Japanese manufacturing," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 45(3), pages 471-487, April.
    11. Katharine G. Abraham & Susan N. Houseman, 1993. "Job Security in America: Lessons from Germany," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number kagsnh1993, March.
    12. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
    13. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
    14. 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 915-38, October.
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