Working Paper: CEPR ID: DP3396
Authors: Michle Belot; Jan Boone; Jan C. van Ours
Abstract: Employment protection is often related to costs incurred by firms when they fire a worker. The stability of the employment relationship, enhanced by employment protection, is also favourable to the productivity of the job. We analyse employment protection focusing on this trade-off between adjustment costs and productivity. We show that from a welfare point of view there is an optimal degree of employment protection.
Keywords: employment protection; holdup; human capital; reforms; welfare
JEL Codes: J41; J63; J68
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Firing costs (J32) | Unemployment (J64) |
| Firing costs (J32) | Worker effort (J29) |
| Employment protection (J68) | Worker investment in firm-specific human capital (J24) |
| Worker investment in firm-specific human capital (J24) | Productivity (O49) |
| Employment protection (J68) | Job stability (J63) |
| Job stability (J63) | Worker investment in firm-specific human capital (J24) |
| Employment protection (J68) | Welfare (I38) |
| Employment protection (J68) | Job tenure (J63) |
| Job tenure (J63) | Worker investment in firm-specific human capital (J24) |