Two features distinguish European and US labour markets. First, most European countries have a considerably more generous unemployment insurance system. Second, the duration of unemployment and employment spells are substantially higher in Europe – employment turnover is lower. We show that...

Employment Protection rules have two separate dimensions: a transfer from the firm to the worker to be laid off and a tax paid outside the firm-worker pair. It is well established that with full wage flexibility statutory severance payments (pure transfers) between employers and dismissed...

In this paper, we incorporate a positive theory of unemployment insurance into a dynamic overlapping generations model with search-matching frictions and on-the-job learning-by-doing. The model shows that societies populated by identical rational agents, but differing in the initial distribution...

Evidence suggests that unemployed individuals can sometimes affect their job prospects by undertaking a costly action like deciding to move or retrain. Realistically, such an opportunity only arises for some individuals and the identity of those may be unobservable ex-ante. The problem of...

Some existing welfare programs (“work-first”) require participants to work in exchange for benefits. Others (“job search-first”) emphasize private job-search and provide assistance in finding and retaining a durable employment. This paper studies the optimal design of welfare programs...

Firing costs due to employment protection legislation have two separate dimensions: a transfer from the firm to the worker to be laid off and a tax paid outside the firm-worker pair. We document that quantitatively transfers are a much larger component than taxes. Nevertheless, to avoid the...

A Welfare-to-Work (WTW) program is a mix of government expenditures on various labor market policies targeted to the unemployed (e.g., unemployment insurance, job search monitoring, social assistance, wage subsidies). This paper provides a dynamic principal-agent framework suitable for analyzing...

Firing-cost-free temporary contracts were introduced in many European countries during the eigthies in order to fight high unemployment rates. Their rationale was to increase job creation in a context of high firing costs that were politically hard to decrease. Temporary contracts have become a...