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Employment Protection Regulations and New Hiring

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  • Kyota Eguchi

    (Faculty of Economics, University of Tokyo)

Abstract

In the real world, there are various regulations concerned with the dismissal of employees. We consider the effects of dismissal regulations with a simple incomplete labor contract model. Under moral hazard, the existence of a regulation always increases wage level and decreases firms' profits. However, the regulation can improve social welfare if workers' outside option is sufficiently low. Furthermore, we will show that the regulation can enhance new hiring.

Suggested Citation

  • Kyota Eguchi, 2000. "Employment Protection Regulations and New Hiring," CIRJE F-Series CIRJE-F-88, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2000cf88
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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2000/2000cf88.pdf
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    References listed on IDEAS

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