Why is Employment Protection Stricter in Europe than in the Us?

CentER Discussion Paper No. 2001-79

33 Pages Posted: 22 Nov 2004

See all articles by Michèle Belot

Michèle Belot

University of Oxford - Nuffield Department of Medicine

Date Written: September 17, 2004

Abstract

In this paper, we argue that the reason why the United States prefer a lower level of employment protection than the European countries lies in the differences in gains and costs from geographical mobility. We present a model where labor migration and employment protection are both determined endogenously. The labor market is modeled within a matching framework, where the employment protection reduces both the job finding and firing rates. Countries with low migration costs and high economic heterogeneity may prefer no employment protection so that workers can move quickly to better horizons rather than being maintained in low productive activities.

Keywords: Geographic labor mobility, employment protection, search frictions, voting

JEL Classification: J61, J63, J64

Suggested Citation

Belot, Michèle V. K., Why is Employment Protection Stricter in Europe than in the Us? (September 17, 2004). CentER Discussion Paper No. 2001-79, Available at SSRN: https://ssrn.com/abstract=621983 or http://dx.doi.org/10.2139/ssrn.621983

Michèle V. K. Belot (Contact Author)

University of Oxford - Nuffield Department of Medicine ( email )

New Road
Oxford, OX1 1NF
United Kingdom

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