The role of employment protection during an exogenous shock to an economy

Miki Malul, Mosi Rosenboim, Tal Shavit, Shlomo Yedidia Tarba

Research output: Contribution to journalArticlepeer-review

4 Scopus citations


This paper explores the role of employment protection when powerful external crises reduce demand for products. We first present a theoretical framework that shows that employment protection has a U-shaped effect on abnormal unemployment during a negative exogenous shock to an economy. Using data from the 33 OECD countries, we analyze how the level of employment protection affected the stability of unemployment rates during the recent global economic crisis. The results suggest that countries with an intermediate level of employment protection will have more stable unemployment rates during a world crisis. The policy implication of our paper is that countries should seek a medium level of employment protection that may act as an automatic stabilizer of the economy on the macro level.

Original languageEnglish
Article number7
JournalGlobal Economy Journal
Issue number2
StatePublished - 1 Jun 2011


  • economic crisis
  • employment protection
  • labor market

ASJC Scopus subject areas

  • Economics, Econometrics and Finance (all)


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