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SEARCH UNEMPLOYMENT WITH ADVANCE NOTICE

Published online by Cambridge University Press:  30 January 2004

PIETRO GARIBALDI
PIETRO GARIBALDI
Affiliation:
Bocconi University and CEPR
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Abstract

This paper studies the effects of employment protection legislation when job separation requires a mandatory advance notice or a firm's costly closure. In a tight labor market, firms use mandatory notice since job-to-job transitions reduce the expected firing costs. In a world without the lengthy procedure imposed by advance notice, job turnover is mainly accommodated by unemployment inflows. As notice length increases, the fraction of job turnover accounted for by job-to-job movements increases. These results are consistent with the fact that the North American and European markets, despite their difference in employment protection legislation, have different unemployment flows but similar job flows.

Keywords

Unemployment FlowsAdvance NoticeSearch Theory
Type
Research Article
Information
Macroeconomic Dynamics , Volume 8 , Issue 1 , February 2004 , pp. 51 - 75
Copyright
© 2004 Cambridge University Press

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