Age-Differenciated Impact of Employment Protection legislation in France: A quantitative investigation

This paper examines the impact of employment protection legislation on the age-dynamics of the labor market. We distinguish short-term from long-term contracts with high firing costs into a life cycle model of the labor market with endogenous job creations and job destructions. We show that high employment protection improves the employment rate of older workers but reduces the employment rate of the youngest. However, short term contracts with low protection do not allow to increase the employment of young workers. In turn, we find that it would better to consider only one type of contracts and set the firing cost at a value as much lower (higher) as the reform is designed to increase the employment rate of the younger (older) workers.