Economics at your fingertips  

Does the market provide sufficient employment protection?

Roberto Burguet and Ramon Caminal ()

Labour Economics, 2008, vol. 15, issue 3, 406-422

Abstract: We ask whether there is an efficiency rationale for public intervention in the form of an employment protection policy. Unlike most of the literature supporting current employment protection legislation we allow employers and workers to include severance payments in their private contracts. We focus attention on a model where firms learn over time about the value of the match. If future wage bargaining cannot be prevented, and even though severance payments may be part of the equilibrium contract, separations are too frequent (private employment protection is insufficient). Mandatory severance payments are not a remedy for this inefficiency. Instead, a Pigouvian tax/subsidy scheme will correct the inefficiency by enhancing employment protection.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Does the Market Provide Sufficient Employment Protection? (2004) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Labour Economics is currently edited by A. Ichino

More articles in Labour Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2021-10-13
Handle: RePEc:eee:labeco:v:15:y:2008:i:3:p:406-422