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Insuring households against unemployment risk is a cornerstone of
modern economic policy. Many countries provide unemployment insurance
partly by employment protection mandates, most commonly
using termination notice mandates. Unlike unemployment insurance
benefits, termination notices can stimulate search effort by the unemployed.
I formalize this idea using a calibrated heterogeneous agents
model, show how termination notice alters the incentives of firms and
workers and study the insurance role of a termination notice in general
equilibrium. I demonstrate how termination notice mandates and unemployment
insurance benefits are complementary policies. Finally, I
also compare between termination notice and severance pay.
