Politiche del lavoro ed esternalit? di ricerca

Riccardo Tilli ()

STUDI ECONOMICI, 2003, vol. 2003/79, issue 79

Abstract: Politiche del lavoro ed esternalit? di ricerca (di Riccardo Tilli) - ABSTRACT: This paper focuses on both qualitative and quantitative effects of five policy instruments (firing tax, hiring subsidies, taxation, unemployment benefits and tax structure) in a search and matching model with endogenous job destruction. The qualitative analysis shows how some policy instruments, such as firing tax and hiring subsidies, produce an ambiguous effect on equilibrium unemployment, given that the variation of the average duration of unemployment and inflows into unemployment work in opposite directions. A quantitative analysis based on numerical simulation of the model is needed, in order to establish which of the two effects will prevail. Most of the economic literature assumes for numerical simulations the case in which the search externalities that arise in the theoretical model, are fully internalised by the market, so that they do not play any role in the computational solution. In this peculiar sense, the intro-duction of every policy instruments produces a distortion that reduces welfare. On the contrary, this paper evaluates the role of policy when search externalities are considered in both the theo-retical and numerical framework. Following this approach, the set of policy instruments avail-able to policy makers allows to combine them in order to internalise search externalities. The results show that hiring subsidies and progressive taxation not only internalise search external-ities, but also compensate the distortions produced by employment protection legislation and unemployment benefits.

Date: 2003
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