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Efficiency-enhancing role of mandatory leave policy in a search-theoretic model of the labor market

Koichi Miyazaki

MPRA Paper from University Library of Munich, Germany

Abstract: Workers temporarily leave their jobs for various reasons, for example, maternity, caregiving, and illness. In such a situation, a firm can lay off these workers and search for a new worker. To protect workers from such a firm's behavior, many developed countries have implemented a mandatory leave policy. The goal of this study was to rationalize such a government intervention in the labor market from an efficiency perspective. To achieve this objective, this study constructed a search-theoretic model of the labor market and analyzed a steady-state equilibrium in the model. The results demonstrated that introducing a mandatory leave policy increases efficiency under certain conditions. This result justifies such government interventions in the labor market from an efficiency perspective.

Keywords: Search-theoretic model of the labor market; temporary leave; mandatory leave policy; efficiency (search for similar items in EconPapers)
JEL-codes: E24 E60 J20 (search for similar items in EconPapers)
Date: 2023-03-09
New Economics Papers: this item is included in nep-dge
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