The Role of Employment Protection During An Exogenous Shock To An Economy

Miki Malul, Mosi Rosenboim () and Tal Shavit ()
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Tal Shavit: The College of Management Academic Studies, Israel

No 1010, Working Papers from Ben-Gurion University of the Negev, Department of Economics

Abstract: This paper explores the role of employment protection when powerful external crises reduce demand for products. We first present a theoretical framework that shows that employment protection has a U-shaped effect on abnormal unemployment during a negative exogenous shock to an economy. Using data from the 33 OECD countries, we analyze how the level of employment protection affected the stability of unemployment rates during the recent global economic crisis. The results suggest that countries with an intermediate level of employment protection will have more stable unemployment rates during a world crisis. The policy implication of our paper is that countries should seek a medium level of employment protection that may act as an automatic stabilizer of the economy on the macro level.

Pages: 15 pages
Date: 2010
New Economics Papers: this item is included in nep-cwa and nep-lab
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http://in.bgu.ac.il/en/humsos/Econ/Workingpapers/1010.pdf First version, 2010 (application/pdf)

Related works:
Journal Article: The Role of Employment Protection during an Exogenous Shock to an Economy (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:bgu:wpaper:1010

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