Unemployment and Employment Protection in a Unionized Economy with Search Frictions

Nikolai Stähler

LABOUR, 2008, vol. 22, issue 2, 271-289

Abstract: Abstract. In the theoretical literature, the effects of employment protection on unemployment are ambiguous. Higher employment protection reduces 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.

Date: 2008
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https://doi.org/10.1111/j.1467-9914.2008.00410.x

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Working Paper: Unemployment and employment protection in a unionized economy with search frictions (2007)
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