IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2003-075.html
   My bibliography  Save this paper

Job-Specific Investment and the Cost of Dismissal Restrictions: The Case of Portugal

Author

Listed:
  • Mr. H. Takizawa

Abstract

Using a search and matching labor market equilibrium model, this paper quantifies lost labor productivity and consumption per worker that emerges from the restrictions on dismissals. Dismissal restrictions hamper the efficient reallocation of workers, with workers remaining longer in jobs. But the restrictions also tend to induce job-specific investments. A calibration exercise applied to Portugal suggests that the restrictions on dismissal slow the pace of worker reallocation and cause substantial losses of labor productivity and consumption. Although lower worker mobility induces job-specific investment that offsets part of the labor productivity and consumption losses, the size of this offsetting effect is, at most, modest.

Suggested Citation

  • Mr. H. Takizawa, 2003. "Job-Specific Investment and the Cost of Dismissal Restrictions: The Case of Portugal," IMF Working Papers 2003/075, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2003/075
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=16422
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "Job reallocation, employment fluctuations and unemployment," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 18, pages 1171-1228, Elsevier.
    2. van Ours, Jan C. & Boone, Jan & Belot, Michèle, 2002. "Welfare Effects of Employment Protection," CEPR Discussion Papers 3396, C.E.P.R. Discussion Papers.
    3. Olympia Bover & Pilar García-Perea & Pedro Portugal, 2000. "Labour market outliers: Lessons from Portugal and Spain," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 15(31), pages 380-428.
    4. van Ours, J. C., 1991. "The efficiency of the Dutch labour market in matching unemployment and vacancies," Other publications TiSEM 4bbea82e-68fb-45e0-b32a-3, Tilburg University, School of Economics and Management.
    5. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
    6. Hogan, Seamus & Ragan, Christopher, 1998. "Job security with equilibrium unemployment," Labour Economics, Elsevier, vol. 5(2), pages 185-185, June.
    7. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    8. Edward P. Lazear, 1990. "Job Security and Unemployment," Palgrave Macmillan Books, in: Yoram Weiss & Gideon Fishelson (ed.), Advances in the Theory and Measurement of Unemployment, chapter 9, pages 245-267, Palgrave Macmillan.
    9. Pedro Portugal & Olivier Blanchard, 2001. "What Hides Behind an Unemployment Rate: Comparing Portuguese and U.S. Labor Markets," American Economic Review, American Economic Association, vol. 91(1), pages 187-207, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mr. Martin Schindler, 2009. "The Italian Labor Market: Recent Trends, Institutions, and Reform Options," IMF Working Papers 2009/047, International Monetary Fund.
    2. Kenichi Ueda & Stijn Claessen, 2016. "Monopoly Rights and Economic Growth: An Inverted U-Shaped Relation," CARF F-Series CARF-F-396, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    3. Claessens, Stijn & Ueda, Kenichi, 2020. "Basic Employment Protection, Bargaining Power, and Economic Outcomes," Journal of Law, Finance, and Accounting, now publishers, vol. 5(2), pages 179-229, September.
    4. Fumitaka Furuoka, 2021. "Does the Shimer puzzle really exist in the American labour market?," Economics Bulletin, AccessEcon, vol. 41(3), pages 1009-1025.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. L'Haridon, Olivier & Malherbet, Franck, 2009. "Employment protection reform in search economies," European Economic Review, Elsevier, vol. 53(3), pages 255-273, April.
    2. Paolo Naticchioni & Emiliano Rustichelli & Antonio Scialà, 2003. "Employment protection and regional worker flows in Italy: an assessment of the theoretical predictions," Working Papers - Dipartimento di Economia 1-DEISFOL, Dipartimento di Economia, Sapienza University of Rome, revised 2003.
    3. Pieter A. Gautier & Coen N. Teulings, 2000. "The Right Man for the Job: Increasing Returns in Search?," Econometric Society World Congress 2000 Contributed Papers 0066, Econometric Society.
    4. Yashiv, Eran, 2007. "Labor search and matching in macroeconomics," European Economic Review, Elsevier, vol. 51(8), pages 1859-1895, November.
    5. van Ours, Jan C. & Boone, Jan & Belot, Michèle, 2002. "Welfare Effects of Employment Protection," CEPR Discussion Papers 3396, C.E.P.R. Discussion Papers.
    6. Ravi Balakrishnan, 2001. "The interaction of firing costs and on-the-job search: an application of a search theoretic model to the Spanish labour market," Working Papers 0102, Banco de España.
    7. Fella Giulio, 2012. "Matching, Wage Rigidities and Efficient Severance Pay," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-35, December.
    8. Etienne Wasmer, 2006. "General versus Specific Skills in Labor Markets with Search Frictions and Firing Costs," American Economic Review, American Economic Association, vol. 96(3), pages 811-831, June.
    9. Yashiv, Eran, 2006. "Evaluating the performance of the search and matching model," European Economic Review, Elsevier, vol. 50(4), pages 909-936, May.
    10. Tito Boeri & Michael C. Burda, 2009. "Preferences for Collective Versus Individualised Wage Setting," Economic Journal, Royal Economic Society, vol. 119(540), pages 1440-1463, October.
    11. Burgess, Simon & Turon, Hélène, 2010. "Worker flows, job flows and unemployment in a matching model," European Economic Review, Elsevier, vol. 54(3), pages 393-408, April.
    12. Hugo Erken & Eric van Loon & Wouter Verbeek, 2015. "Mismatch on the Dutch labour market in the Great Recession," CPB Discussion Paper 303, CPB Netherlands Bureau for Economic Policy Analysis.
    13. Eric J. Bartelsman & Pieter A. Gautier & Joris De Wind, 2016. "Employment Protection, Technology Choice, And Worker Allocation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57(3), pages 787-826, August.
    14. F.A.G. den Butter & M. van Dijk, 1997. "The Pace of Structural Change, Cyclical Shocks and Unemployment Dynamics," Tinbergen Institute Discussion Papers 97-053/3, Tinbergen Institute.
    15. Butter, F.A.G. den, 1995. "Labour participation and labour market dynamics in an empirical flow model with heterogeneous unemployment," Serie Research Memoranda 0022, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    16. Gautier, P. & Broersma, L., 1994. "The timing of labor reallocation and the business cycle," Serie Research Memoranda 0029, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    17. Giovanni Gallipoli & Gianluigi Pelloni, 2013. "Macroeconomic Effects of Job Reallocations: A Survey," Review of Economic Analysis, Digital Initiatives at the University of Waterloo Library, vol. 5(2), pages 127-176, December.
    18. Fabrice Collard & Patrick Fève & François Langot & Corinne Perraudin, 2002. "A structural model of US aggregate job flows," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 17(3), pages 197-223.
    19. Carlo Di Giorgio & Massimo Giannini, 2012. "A comparison of the Beveridge curve dynamics in Italy and USA," Empirical Economics, Springer, vol. 43(3), pages 945-983, December.
    20. Richard Rogerson & Robert Shimer & Randall Wright, 2004. "Search-Theoretic Models of the Labor Market-A Survey," NBER Working Papers 10655, National Bureau of Economic Research, Inc.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2003/075. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.