Deposit-Refundon Labor: A Solution to Equilibrium Unemployment?

Ben Heijdra () and Jenny Ligthart

No 2000/009, IMF Working Papers from International Monetary Fund

Abstract: The paper studies the employment effects of a deposit-refund scheme on labor in a simple search-theoretic model of the labor market. It is shown that if a firm pays a deposit to the government when it fires a worker, to be refunded when it employs the same or another worker, the vacancy rate increases and the unemployment rate declines. However, the scheme introduces rigidities in the labor market that may be undesirable in countries wanting to liberalize their labor markets.

Keywords: WP; labor market; deposit-refund schemes; firing costs; hiring subsidies; job search; unemployment; A. firm behavior; firm-worker pairing; co-state variable; restructuring firm; rents physical capital; Labor markets; Employment; Wages (search for similar items in EconPapers)
Pages: 19
Date: 2000-01-01
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Related works:
Journal Article: Deposit-Refund on Labor: A Solution to Equilibrium Unemployment? (2001)
Working Paper: Deposit-refund on labor: a solution to equilibrium unemployment? (1999)
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