Franck Malherbet

Education and the Welfare Gains from Employment Protection

This paper studies the impact of an European-like labor market regulation on the return to schooling, equilibrium unemployment and welfare. We show that firing costs and temporary employment have opposite effects on educational choices. We furthermore demonstrate that a laissez faire economy with no regulation is inefficient as it is characterized by insufficient educational investments leading to excess job destruction and inadequate job creation. By stabilizing employment relationships, firing costs may spur educational investments and therefore lead to welfare and productivity gains, though a first-best policy would be to subsidize education. However, there is little chance for a dual labor market, as is common in many European countries, with heavily regulated long-term contracts and more flexible short-term contracts to raise the incentives to schooling and aggregate welfare.

Employment Protection Reform and Unemployment Inequality in a Matching Model (Reforme De La Protection De L'Emploi Et Inegalites Face Au Chomage Dans Un Modele D'Appariement)

This paper studies the impact of an unemployment protection legislation reform - a substitution between an experience rated tax and firing costs - on the level and structure of unemployment by skills. In this purpose, we consider a matching model which incorporates endogenous reservation products for job creation and job destruction, labor demand derives from a free entry condition and the tax rate aimed at financing unemployment benefits results from a balanced budget constraint. In this setting, it is shown that the introduction of the experience rated tax may improve the performance of the labor marekt; the drawbacks of such a reform depend on the degree of substitution between traditional firing costs and the experience rated tax.