Welfare-improving employment protection

Michele Belot, Jan Boone, Jan van Ours

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

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.

Original languageEnglish
Pages (from-to)381-396
Number of pages16
JournalEconomica
Volume74
Issue number295
DOIs
Publication statusPublished - Aug 2007

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