Employment Protection and Unemployment Benefits: On Technology Adoption and Job Creation in a Matching Model

Kjell Lommerud (), Odd Rune Straume and Steinar Vagstad

Scandinavian Journal of Economics, 2018, vol. 120, issue 3, 763-793

Abstract: We analyse the effects of different labour‐market policies (employment protection, unemployment benefits, and payroll taxes) on job creation and technology choices in a model where firms are matched with workers of different productivity and wages are determined by ex post bargaining. The model is characterized by two intertwined sources of inefficiency, namely a matching externality and a hold‐up externality associated with the bargaining strength of workers. The results depend on the relative importance of the two externalities and on worker risk aversion. “Flexicurity”, meaning low employment protection and generous unemployment insurance, can be optimal if workers are sufficiently risk‐averse and the hold‐up problem is relatively important.

Date: 2018
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https://doi.org/10.1111/sjoe.12244

Related works:
Working Paper: Employment protection and unemployment benefits: On technology adoption and job creation in a matching model (2016)
Working Paper: Employment protection and unemployment benefits: on technology adoption and job creation in a matching model (2012)
Working Paper: Employment protection and unemployment benefits: On technology adoption and job creation in a matching model (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:scandj:v:120:y:2018:i:3:p:763-793

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