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Time to Say Goodbye: The Macroeconomic Implications of Termination Notice

Tomer Ifergane

No 2212, Discussion Papers from Centre for Macroeconomics (CFM)

Abstract: In many countries, a sizeable portion of unemployment insurance is provided by employment protection policies, most commonly, termination notice. I show how termination notice alters wage bargaining outcomes and disincentivises job creation. I study the insurance role of termination notice in a general equilibrium heterogeneous agents model calibrated to moments of the Israeli labour market, which has both conventional unemployment insurance and termination notice. I demonstrate the complementarity between the two policies in the presence of moral hazard, which makes their joint design desirable. Finally, I find that termination notice is underutilised in the Israeli case.

Keywords: Termination notice; Employment protection; Unemployment insurance; Incomplete markets; Search and matching; Heterogeneous agents; Optimal policy (search for similar items in EconPapers)
JEL-codes: D52 D58 E21 E24 E60 J63 J64 J65 (search for similar items in EconPapers)
Pages: 79 pages
Date: 2022-08
New Economics Papers: this item is included in nep-dge
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