This paper examines the age-related design of ﬁring taxes by extending the theory of job creation and job destruction to account for a ﬁnite working life-time. We ﬁrst argue that the potential employment gains related to employment protection are high for older workers,but higher ﬁring taxes for these workers increase job destruction rates for the younger generations. On the other hand, age-decreasing ﬁring taxes can lead to lower job destruction rates at all ages. Furthermore, from a normative standpoint, because ﬁrings of older (younger) workers exert a negative (positive) externality on the matching process, weﬁnd that the ﬁrst best age-dynamic of ﬁring taxes and hiring subsidies is typically hump-shaped. Taking into account distortions related to unemployment beneﬁts and bargaining power shows the robustness of this result.
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