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Unemployment and employment protection in a unionized economy with search frictions


  • Stähler, Nikolai


In theoretical literature, the effects of employment protection on unemployment are ambiguous. Higher employment protection decreases job creation as well as job destruction. However, in most models, wages are bargained individually between workers and firms. Using a conventional matching model in which a monopoly union sets wages, I show that employment protection can unambiguously increase unemployment. Interestingly, I find that tightening the restrictions on redundancies and dismissals may even increase the probability of dismissal.

Suggested Citation

  • Stähler, Nikolai, 2007. "Unemployment and employment protection in a unionized economy with search frictions," Discussion Paper Series 1: Economic Studies 2007,04, Deutsche Bundesbank.
  • Handle: RePEc:zbw:bubdp1:5558

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    References listed on IDEAS

    1. Hashem Pesaran & Davide Pettenuzzo & Allan Timmermann, 2007. "Learning, Structural Instability, and Present Value Calculations," Econometric Reviews, Taylor & Francis Journals, vol. 26(2-4), pages 253-288.
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    Cited by:

    1. Moser, Christoph & Stähler, Nikolai, 2009. "Spillover effects of minimum wages in a two-sector search model," Discussion Paper Series 1: Economic Studies 2009,01, Deutsche Bundesbank.

    More about this item


    employment protection; search and matching models; unemployment; unions;

    JEL classification:

    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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