| Title | Job tenure Jigsaw: Why Is Employment Protection Bad for Labor Market Fluidity? |
| Date | April 28, 2025 (Monday) 10:40-12:10 |
| Location | 12th floor Discussion Room |
| Abstract | This paper examines how employment protection legislation (EPL) affects labor market fluidity through its influence on human capital accumulation. A structural model in which workers optimally accumulate human capital shows that stringent EPL induces a shift from general to firm-specific human capital, thereby reducing mobility across employers. A quantitative analysis using Japanese microdata reveals that stringent EPL can quantitatively account for the sizable wage premiums associated with employer tenure in Japan relative to the U.S., and consequently replicate the observed difference in labor market fluidity between the two countries. Although stringent EPL slightly enhances overall human capital accumulation, the resulting decline in labor market fluidity can lead to significant output losses by slowing the recovery from structural changes. |
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