Premium
Employment Protection and Unemployment Benefits: On Technology Adoption and Job Creation in a Matching Model
Author(s) -
Lommerud Kjell Erik,
Straume Odd Rune,
Vagstad Steinar
Publication year - 2018
Publication title -
the scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/sjoe.12244
Subject(s) - economics , unemployment , flexicurity , labour economics , externality , matching (statistics) , payroll , inefficiency , productivity , microeconomics , statistics , mathematics , accounting , macroeconomics , economic growth
We analyse the effects of different labour‐market policies (employment protection, unemployment benefits, and payroll taxes) on job creation and technology choices in a model where firms are matched with workers of different productivity and wages are determined by ex post bargaining. The model is characterized by two intertwined sources of inefficiency, namely a matching externality and a hold‐up externality associated with the bargaining strength of workers. The results depend on the relative importance of the two externalities and on worker risk aversion. “Flexicurity”, meaning low employment protection and generous unemployment insurance, can be optimal if workers are sufficiently risk‐averse and the hold‐up problem is relatively important.