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The Impact of Extending Employment Protection to Agency Workers on Firms

Author

Listed:
  • Alejandro Micco
  • Pablo Muñoz

Abstract

We study the impact of a reform that extended employment protection to temporary agency workers. Using a difference-in-difference research design, we show that plants more exposed to the regulation experienced a decrease in revenues and total employment, and that the latter effect was attenuated in industries with high elasticity of substitution between agency and nonagency workers. We also find that labor misallocation increased as a consequence of the regulation. A model of labor demand in the presence of agency work rationalizes these results.

Suggested Citation

  • Alejandro Micco & Pablo Muñoz, 2024. "The Impact of Extending Employment Protection to Agency Workers on Firms," American Economic Journal: Macroeconomics, American Economic Association, vol. 16(1), pages 66-101, January.
    • Handle: RePEc:aea:aejmac:v:16:y:2024:i:1:p:66-101
    DOI: 10.1257/mac.20210249
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    More about this item

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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