I argue that the reason why the United States prefers a lower level of employment protection than the European countries lies in the differences in gains and costs from geographical mobility. I present a model in which labour migration and employment protection are both determined endogenously....

This paper derives new results on the welfare effects of employment protection. Using data from 17 OECD countries, we show that there exists an inverse U-shape relationship between employment protection and economic growth. Using a simple theoretical model with non-contractible specific...