We provide evidence on how two important types of institutions – dismissal barriers, and bonus pay – affect contract enforcement behavior in a market with incomplete contracts and repeated interactions. Dismissal barriers are shown to have a strong negative impact on worker...

This paper investigates the social preferences over labor market flexibility, in a general equilibrium model of dynamic labor demand where the productivity of active firms evolves as a Geometric Brownian motion. A key result demonstrated is that how the economy responds to shocks, i.e....

Although labor market duality is a widespread phenomenon in many OECD countries, there is yet no research consent on the effects of duality on labor market dynamics and performance. Against this background, using a New Keynesian model with unemployment, this paper theoretically investigates the...

This paper provides evidence for the size of firing costs for eight countries. In contrast to the existing literature, we use the optimality conditions obtained in a search and matching model to find a reduced form equation for firing costs. We find that our estimates are slightly larger...

Severance pay, a fixed-sum payment to workers at job separation, has been the focus of intense policy concern for the last several decades, but much of this concern is unearned. The design of the ideal separation package is outlined and severance pay emerges as a natural component of job...

This paper uses the fact that firing costs are tenure dependent to analyze their effect on turnover and productivity. I exploit a 1999 British reform that lowered from two to one year the tenure necessary for a worker to be able to sue their employer for unfair dismissal. Empirical results show...