Unemployment and employment protection in a unionized economy with search frictions

Nikolai Stähler ()

No 2007,04, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank, Research Centre

Abstract: 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.

Keywords: employment protection; search and matching models; unemployment; unions (search for similar items in EconPapers)
JEL-codes: J41 J64 J65 J68 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-lab
Date: Written 2007
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Related works:
Journal Article: Unemployment and Employment Protection in a Unionized Economy with Search Frictions (2008)
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