DP3396 Welfare Effects of Employment Protection
Author(s): | Michèle Belot, Jan Boone, Jan C. van Ours |
Publication Date: | May 2002 |
Keyword(s): | employment protection, hold-up, human capital, reforms, welfare |
JEL(s): | J41, J63, J68 |
Programme Areas: | Labour Economics |
Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=3396 |
Employment protection is often related to costs incurred by firms when they fire a worker. The stability of the employment relationship, enhanced by employment protection, is also favourable to the productivity of the job. We analyse employment protection focusing on this trade-off between adjustment costs and productivity. We show that from a welfare point of view there is an optimal degree of employment protection.