Layoff taxes and minimum wage: Two complementary public policies

Frédéric Gavrel (1) , Isabelle Lebon (1) , Thérèse Rebière (2)

1 CREM - Centre de recherche en économie et management
2 CERENE - Centre d'Etude et de Recherche en économiE et gestioN LogistiquE

In a matching model in which the job destruction rate and the output are endogenous, we show that the presence of a binding minimum wage prompts firms to choose too risky jobs. Introducing layoff taxes therefore reduces unemployment and improves market efficiency.

Mots clés: Employment protection; layoff taxes; minimum wage; equilibrium unemployment; market efficiency

Domaines: Economies et finances

Frédéric Gavrel, Isabelle Lebon, Thérèse Rebière. Layoff taxes and minimum wage: Two complementary public policies. Economics Letters, 2010, 107 (1), pp.30-32. ⟨10.1016/j.econlet.2009.12.016⟩. ⟨halshs-00545212⟩