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| Author: | Schmitz, P. W. |
| Title: | Job protection laws and agency problems under asymmetric information |
| Journal: | European Economic Review
2004 : OCT, VOL. 48:5, p. 1027-1046 |
| Index terms: | Asymmetric information Job security Employment protection Law Models |
| Language: | eng |
| Abstract: | This article focuses on employment protection laws from a principal-agent theoretic perspective. Under symmetric information, a law restricts the class of feasible contracts, which will reduce employerÂ’s profit. In contrast, under asymmetric information a job protection law may decrease employerÂ’s profit but in the same time increase the total surplus. The results from the study indicate that the total surplus generated in the principal-agent relationship can be increased by state-mandated employment protection. |
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