Efficiency-enhancing role of mandatory leave policy in a search-theoretic model of the labor market

Miyazaki, Koichi (2023): Efficiency-enhancing role of mandatory leave policy in a search-theoretic model of the labor market.

Abstract

Workers temporarily leave their jobs for various reasons, for example, maternity, caregiving, and illness. In such a situation, a firm can lay off these workers and search for a new worker. To protect workers from such a firm's behavior, many developed countries have implemented a mandatory leave policy. The goal of this study was to rationalize such a government intervention in the labor market from an efficiency perspective. To achieve this objective, this study constructed a search-theoretic model of the labor market and analyzed a steady-state equilibrium in the model. The results demonstrated that introducing a mandatory leave policy increases efficiency under certain conditions. This result justifies such government interventions in the labor market from an efficiency perspective.

• Item Type: MPRA Paper
• Language: English
• Keywords: Search-theoretic model of the labor market; temporary leave; mandatory leave policy; efficiency
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E60 - General; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J20 - General

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