Short job tenures and firing taxes in the search theory of unemployment.
Centre for Economic Performance, London School of Economics and Political Science, London, UK.
This paper studies the effects of firing taxes on the job destruction rate, when probation period - or temporary contract - policies are implemented in an otherwise exogenous job separation search model. It is shown that contrary to conventional wisdom, firing taxes can amplify the job turnover rate by providing incentives to destroy surviving matches at the end of the probation period. Moreover, low skill workers are shown to be more severely affected while wage inequality across different productivity groups may increase.
||© 2004 Vasileios Gkionakis
||Labor market policies, Firing taxes, Probation period, Temporary contracts, Unemployment
|Library of Congress subject classification:
||H Social Sciences > HD Industries. Land use. Labor
|Journal of Economic Literature Classification System:
||J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J64 - Unemployment: Models, Duration, Incidence, and Job Search
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E24 - Macroeconomics: Employment; Unemployment; Wages; Intergenerational Income Distribution (includes wage indexation)
J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J63 - Turnover; Vacancies; Layoffs
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||25 Jul 2008 11:55
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