Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/35801
Authors: 
Chéron, Arnaud
Hairault, Jean-Olivier
Langot, François
Year of Publication: 
2008
Series/Report no.: 
IZA discussion papers 3851
Abstract: 
This paper examines the age-related design of firing taxes by extending the theory of job creation and job destruction to account for a finite working life-time. We first argue that the potential employment gains related to employment protection are high for older workers, but higher firing taxes for these workers increase job destruction rates for the younger generations. On the other hand, age-decreasing firing taxes can lead to lower job destruction rates at all ages. Furthermore, from a normative standpoint, because firings of older (younger) workers exert a negative (positive) externality on the matching process, we find that the first best age-dynamic of firing taxes and hiring subsidies is typically hump-shaped. Taking into account distortions related to unemployment benefits and bargaining power shows the robustness of this result, in contradiction with the existing policies in most OECD countries.
Subjects: 
Search
matching
endogenous destruction
older workers
JEL: 
J22
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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