Suppose the Parliament passes legislation making it more difficult for firms to fire workers (an example is a law requiring severance pay to fired workers). If this legislation reduces the rate of job separation without affecting the rate of job finding, how would the natural rate of unemployment change? Do you think that it is plausible that legislation would not affect the rate of job finding? Evaluate
Suppose the Parliament passes legislation making it more difficult for firms to fire workers (an example is a law requiring severance pay to fired workers). If this legislation reduces the rate of job separation without affecting the rate of job finding, how would the natural rate of unemployment change? Do you think that it is plausible that legislation would not affect the rate of job finding? Evaluate
Chapter7: Unemployment And Inflation
Section: Chapter Questions
Problem 16E
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Suppose the Parliament passes legislation making it more difficult for firms to fire workers (an example is a law requiring severance pay to fired workers). If this legislation reduces the rate of job separation without affecting the rate of job finding, how would the natural rate of
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