6533b831fe1ef96bd12982e1

RESEARCH PRODUCT

Employment Protection Reform and Unemployment Inequality in a Matching Model (Reforme De La Protection De L'Emploi Et Inegalites Face Au Chomage Dans Un Modele D'Appariement)

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This paper studies the impact of an unemployment protection legislation reform - a substitution between an experience rated tax and firing costs - on the level and structure of unemployment by skills. In this purpose, we consider a matching model which incorporates endogenous reservation products for job creation and job destruction, labor demand derives from a free entry condition and the tax rate aimed at financing unemployment benefits results from a balanced budget constraint. In this setting, it is shown that the introduction of the experience rated tax may improve the performance of the labor marekt; the drawbacks of such a reform depend on the degree of substitution between traditional firing costs and the experience rated tax.