A Note on the Swampy Field of Shirking and the Blanchard-Tirole Design of Employment Protection

The note addresses the relevance of shirking for the reform of employment protection systems designed by Blanchard and Tirole. Broadening Blanchard and Tirole’s informal discussion of quits and layoffs and the role of the courts, it is argued that the problems connected with shirking phenomena allow the courts to retain a remarkable role in layoff processes for a large portion of individual layoffs. It is emphasized that these aspects should also be taken into account in the implementation of the reform. A brief discussion of the impact of the hypothetical implementation of the Blanchard-Tirole scheme in Italy closes the note.