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Better protected, better paid: Evidence on how employment protection affects wages

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  • van der Wiel, Karen

Abstract

This paper empirically establishes the effect of the employer's term of notice on the wage level of employees. The term of notice is defined as the period an employer has to notify workers in advance of their upcoming dismissal. The wages paid during this period are an important element of firing costs and hence employment protection. To find a causal effect, I exploit the exogenous change in the term of notice that resulted from the introduction of a new Dutch law in 1999. Strong evidence is found that a longer 'dormant' term of notice leads to higher wages. In my sample, an additional month of notice increases wages by three percent, ceteris paribus.

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Bibliographic Info

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 17 (2010)
Issue (Month): 1 (January)
Pages: 16-26

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Handle: RePEc:eee:labeco:v:17:y:2010:i:1:p:16-26

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Web page: http://www.elsevier.com/locate/labeco

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Keywords: Employment protection Term of notice Wages;

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  1. Holmlund, Bertil & Zetterberg, Johnny, 1991. "Insider effects in wage determination : Evidence from five countries," European Economic Review, Elsevier, vol. 35(5), pages 1009-1034, July.
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  17. Leonardi, Marco & Pica, Giovanni, 2010. "Who Pays for It? The Heterogeneous Wage Effects of Employment Protection Legislation," IZA Discussion Papers 5335, Institute for the Study of Labor (IZA).
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Citations

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Cited by:
  1. Marco Leonardi & Giovanni Pica, 2010. "Who Pays for it? The Heterogeneous Wage Effects of Employment Protection Legislation," CSEF Working Papers 265, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 13 May 2012.
  2. Alessio J. G. Brown & Dennis Snower, 2009. "Incentives and Complementarities of Flexicurity," Kiel Working Papers 1526, Kiel Institute for the World Economy.
  3. Cervini-Plá, María & Ramos, Xavi & Silva, José I., 2010. "Wage Effects of Non-Wage Labour Costs," IZA Discussion Papers 4882, Institute for the Study of Labor (IZA).
  4. Salverda, Wiemer & Checchi, Daniele, 2014. "Labour-Market Institutions and the Dispersion of Wage Earnings," IZA Discussion Papers 8220, Institute for the Study of Labor (IZA).
  5. Marco Leonardi & Giovanni Pica, 2007. "Employment Protection Legislation and Wages," CSEF Working Papers 175, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  6. Wiel, K.M. van der, 2009. "Essays on Expectations, Power and Social Security," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3710369, Tilburg University.
  7. Bosio, Giulio, 2009. "Temporary employment and wage gap with permanent jobs: evidence from quantile regression," MPRA Paper 16055, University Library of Munich, Germany.

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