A Positive Analysis of Targeted Employment Protection Legislation

31 Pages Posted: 9 Apr 2007

See all articles by Juan Jose Dolado

Juan Jose Dolado

Charles III University of Madrid - Department of Economics; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Marcel Jansen

Charles III University of Madrid - Department of Economics; IZA Institute of Labor Economics

Juan F. Jimeno

Banco de España - Research Department; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Date Written: March 2007

Abstract

In many countries, Employment Protection Legislation (EPL) establishes less strict dismissal procedures for specific groups of workers. This paper builds a simple matching model with heterogeneous workers in order to analyze this feature of EPL. We use the model to analyze the effects of reforms targeted at lowering the firing costs of a particular group of workers, and compare the results with those stemming from a comprehensive reform that reduces firing costs for all workers. The model is calibrated for the Spanish economy, where an important reform of this kind took place in 1997. Overall, our results point out that EPL reforms achieve the largest reduction in unemployment when they are targeted to workers with lower and more volatile productivity.

Keywords: firing costs, unemployment, matching

JEL Classification: J64, J63

Suggested Citation

Dolado, Juan Jose and Jansen, Marcel and Jimeno, Juan F., A Positive Analysis of Targeted Employment Protection Legislation (March 2007). IZA Discussion Paper No. 2679, Available at SSRN: https://ssrn.com/abstract=978767 or http://dx.doi.org/10.2139/ssrn.978767

Juan Jose Dolado (Contact Author)

Charles III University of Madrid - Department of Economics ( email )

Calle Madrid 126
Getafe, 28903
Spain
+34 91 624 9300 (Phone)
+34 91 624 9313 (Fax)

HOME PAGE: http://www.eco.uc3m.es/english/staff/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Marcel Jansen

Charles III University of Madrid - Department of Economics ( email )

Calle Madrid 126
Getafe, 28903
Spain
+34 91 624 5740 (Phone)
+34 91 624 9875 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Juan F. Jimeno

Banco de España - Research Department ( email )

Alcala 48
28014 Madrid
Spain

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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