Welfare-Improving Employment Protection

16 Pages Posted: 11 Jul 2007

See all articles by Michèle Belot

Michèle Belot

University of Oxford - Nuffield Department of Medicine

Jan Boone

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR); TILEC

Jan C. van Ours

Tilburg University - Department of Economics; University of Melbourne - Department of Economics

Abstract

This paper derives new results on the welfare effects of employment protection. Using data from 17 OECD countries, we show that there exists an inverse U-shape relationship between employment protection and economic growth. Using a simple theoretical model with non-contractible specific investments, we show that over some range increasing employment protection does indeed raise welfare. We also show that the optimal level of employment protection depends on other labour market features, such as the bargaining power of workers and the existence of wage rigidities like the minimum wage.

Suggested Citation

Belot, Michèle V. K. and Boone, Jan and van Ours, Jan C., Welfare-Improving Employment Protection. Economica, Vol. 74, No. 295, pp. 381-396, August 2007, Available at SSRN: https://ssrn.com/abstract=999453 or http://dx.doi.org/10.1111/j.1468-0335.2006.00576.x

Michèle V. K. Belot (Contact Author)

University of Oxford - Nuffield Department of Medicine ( email )

New Road
Oxford, OX1 1NF
United Kingdom

Jan Boone

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2399 (Phone)
+31 13 466 3042 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

TILEC ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Jan C. Van Ours

Tilburg University - Department of Economics ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2880 (Phone)
+31 13 466 3042 (Fax)

University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia

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