?url_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Adc&rft.relation=http%3A%2F%2Feprints.imtlucca.it%2F891%2F&rft.title=Uncertainty+and+the+politics+of+employment+protection&rft.creator=Vindigni%2C+Andrea&rft.subject=HB+Economic+Theory&rft.subject=HD+Industries.+Land+use.+Labor&rft.description=This+paper+investigates+the+role+that+idiosyncratic+uncertainty+plays+in+shaping+social+preferences+over+the+degree+of+labor+market+flexibility%2C+in+a+general+equilibrium+model+of+dynamic+labor+demand+where+the+productivity+of+firms+evolves+over+time+as+a+Geometric+Brownian+motion.+A+key+result+demonstrated+is+that+how+the+economy+responds+to+shocks%2C+i.e.+unexpected+changes+in+the+drift+and+standard+deviation+of+the+stochastic+process+describing+the+dynamics+of+productivity%2C+depends+on+the+power+of+labor+to+extract+rents+and+on+the+status+quo+level+of+firing+costs.+In+particular%2C+we+show+that+when+firing+costs+are+relatively+low+to+begin+with%2C+a+transition+to+a+rigid+labor+market+is+favored+by+all+and+only+the+employed+workers+with+idiosyncratic+productivity+below+some+threshold+value.+A+more+volatile+environment%2C+and+a+lower+rate+of+productivity+growth%2C+i.e.+%22bad+times%2C%22+increase+the+political+support+for+more+labor+market+rigidity+only+where+labor+appropriates+of+relatively+large+rents.+Moreover%2C+we+demonstrate+that+when+the+status+quo+level+of+firing+costs+is+relatively+high%2C+the+preservation+of+a+rigid+labor+market+is+favored+by+the+employed+with+intermediate+productivity%2C+whereas+all+other+workers+favor+more+flexibility.+The+coming+of+better+economic+conditions+need+not+favor+the+demise+of+high+firing+costs+in+rigid+high-rents+economies%2C+because+%22good+times%22+cut+down+the+support+for+flexibility+among+the+least+productive+employed+workers.+The+model+described+provides+some+new+insights+on+the+comparative+dynamics+of+labor+market+institutions+in+the+U.S.+and+in+Europe+over+the+last+few+decades%2C+shedding+some+new+light+both+on+the+reasons+for+the+original+build-up+of+%22Eurosclerosis%2C%22+and+for+its+the+persistence+up+to+the+present+day.&rft.publisher=IZA+DIscussion+paper&rft.date=2008&rft.type=Working+Paper&rft.type=NonPeerReviewed&rft.identifier=++Vindigni%2C+Andrea++Uncertainty+and+the+politics+of+employment+protection.++Working+Paper++%23+%2F2008++++IZA+DIscussion+paper+++++++++&rft.relation=http%3A%2F%2Fwww.iza.org%2Fen%2Fwebcontent%2Fpublications%2Fpapers%2FviewAbstract%3Fdp_id%3D3509