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Dismissals for Cause: The Difference That Just Eight Paragraphs Can Make

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Author Info
Pedro S. Martins

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Abstract

This article presents evidence about the effects of dismissals-for-cause requirements, a specific component of employment protection legislation that has received little attention. I study a quasi-experiment generated by a law introduced in Portugal: out of the 12 paragraphs in the law that dictated the costly procedure required for dismissals for cause, eight did not apply to small firms. Using matched employer-employee longitudinal data and difference-in-differences methods, I examine the impact of that differentiated change in firing costs upon several variables. The results do not indicate robust effects on job or worker flows, although some estimates suggest an increase in hirings. However, firms that gain flexibility in their dismissals exhibit sizable increases in their relative performance. This finding suggests that reducing firing costs of the type studied here increases workers' effort. (c) 2009 by The University of Chicago. All rights reserved..

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File URL: http://www.journals.uchicago.edu/doi/pdf/10.1086/599978
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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 27 (2009)
Issue (Month): 2 (04)
Pages: 257-279
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Handle: RePEc:ucp:jlabec:v:27:y:2009:i:2:p:257-279

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References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Martins, Pedro S. & Opromolla, Luca David, 2009. "Exports, Imports and Wages: Evidence from Matched Firm-Worker-Product Panels," IZA Discussion Papers 4646, Institute for the Study of Labor (IZA). [Downloadable!]
  2. von Below, David & Thoursie, Peter, 2008. "Last in, first out? Estimating the effect of seniority rules in Sweden," Working Paper Series 2008:27, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
  3. Fraisse, H. & Kramarz, F. & Prost, C., 2009. "Labor Court Inputs, Judicial Cases Outcomes and Labor Flows: Identifying Real EPL," Documents de Travail 256, Banque de France. [Downloadable!]
  4. Centeno, Mario & Novo, Alvaro A., 2009. "When Supply Meets Demand: Wage Inequality in Portugal," IZA Discussion Papers 4592, Institute for the Study of Labor (IZA). [Downloadable!]
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