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

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  • Pedro S. Martins

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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Bibliographic 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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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Firm (but not too strong) labour cuts
    by Pedro S. Martins in The Portuguese Economy on 2011-05-05 01:34:00
  2. Labour law and firm performance
    by Pedro S. Martins in The Portuguese Economy on 2011-01-22 19:47:00
  3. Employment protection effects
    by chris dillow in Stumbling and Mumbling on 2011-01-11 13:43:39
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