On the evasion of employment protection legislation

Florian Baumann and Tim Friehe

Labour Economics, 2012, vol. 19, issue 1, 9-17

Abstract: This paper analyzes how the option to evade employment protection legislation impacts on unemployment. Using a stylized model, it is established that the level of unemployment is non-monotonous in the degree of strictness with which employment protection legislation is enforced. Considering just cause and social criteria requirements for three regulatory regimes representative of a large number of industrialized countries, we find that different regimes generate different dismissal decisions only if the regimes are strictly enforced. In contrast, unemployment rates may differ across regimes even in the case of weak enforcement. Additionally, we find that it may be worse for the economy to weakly enforce harmful regulations than to strictly enforce them.

Keywords: Evasion; Employment protection; Dismissal regulations; Heterogeneous workers (search for similar items in EconPapers)
JEL-codes: J63 J64 K31 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:19:y:2012:i:1:p:9-17

DOI: 10.1016/j.labeco.2011.06.005

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