Workers Self-Selection between Workplaces and Employment Protection Legislation

This model explains the self-selection of workers between workplaces which differ in the return to workers' skill and the level of job security. Incomplete information in the market enables the reallocation-process in which each worker chooses her best job. The model also clarifies the distortion of the efficiency as a result of providing workers with employment protection legislation (EPL). The simulation results provide some instruments to quantify the self-selection, to estimate the EPL damage in terms of labor productivity, to quantify the tradeoff between job security and the level of the wage, and to measure the effects of policy decisions