Age-Specific Labour Market Effects of Employment Protection - A numerical approach

The effect of employment protection on the total number of jobs is ambiguous. The positive effect of lower job destruction is counteracted by the negative effect of lower job creation. This ambiguity carries over to the more specific case of age-related employment protection.

Numerical analysis can be illuminating when countervailing effects produce an ambiguity. In this paper, I present a numerical model based on the theoretical set-up of Chéron, Hairault and Langot (2011). Simulations performed with the model highlight age-specific effects of general employment protection measures and effects of measures targeted at particular age-groups on workers outside the target group. Firing taxes and hiring subsidies have age-specific consequences because employment and unemployment rates vary over the lifecycle. Positive effects of employment protection for the target group can be outweighed by negative effects for other workers.