Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/308515 
Year of Publication: 
2024
Citation: 
[Journal:] Journal for Labour Market Research [ISSN:] 2510-5027 [Volume:] 58 [Issue:] 1 [Article No.:] 21 [Year:] 2024 [Pages:] 1-28
Publisher: 
Springer, Heidelberg
Abstract: 
I develop an equilibrium-matching model with job rationing and endogenous layoffs in order to investigate whether the composition of unemployment (rationing versus frictional) influences the way firing costs affect employment. The model suggests that firing costs lead to a strong adverse employment effect if unemployment is mainly caused by job rationing, whereas in labor markets driven by search frictions firing costs have only a negligible impact on employment. The paper tests this hypothesis using data on the adoption of wrongful-dismissal laws adopted by U.S. state courts during the 1970s and 1980s. Results indicate that for two of the three wrongful-dismissal laws investigated, unemployment composition is crucial for the induced employment effects.
Subjects: 
Difference-in-difference
Employment protection
Firing costs
Rationing unemployment
Search unemployment
Search-and-matching
Wrongful-dismissal-laws
JEL: 
O31
J64
J65
O38
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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