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The effect of trial periods in employment on firm hiring behavior

Author

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  • Sin Isabelle

    (Motu Economic and Public Policy Research, 97 Cuba St, Wellington6011, New Zealand)

  • Chappell Nathan

    (The Behavioural Insights Team, 22 Willeston St, Wellington6011, New Zealand)

Abstract

Recent changes in New Zealand law decreased the cost of dismissing employees within their first 3 months with an employer, with the aim of encouraging firms to increase hiring by reducing the associated risk. We use monthly linked employer–employee data and exploit the staggered introduction of the policy to estimate its effect on hiring. We find that the policy had little effect on the number of hires, the hiring of jobseekers of unknown quality, or the stability of employment. Our results suggest that policies that temporarily lower dismissal costs do not necessarily increase firm hiring.

Suggested Citation

  • Sin Isabelle & Chappell Nathan, 2020. "The effect of trial periods in employment on firm hiring behavior," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 10(1), pages 1-51, March.
    • Handle: RePEc:vrs:izajlp:v:10:y:2020:i:1:p:51:n:4
    DOI: 10.2478/izajolp-2020-0009
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    1. Sin Isabelle & Chappell Nathan, 2020. "The effect of trial periods in employment on firm hiring behavior," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 10(1), pages 1-51, March.
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    1. Sin Isabelle & Chappell Nathan, 2020. "The effect of trial periods in employment on firm hiring behavior," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 10(1), pages 1-51, March.

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    More about this item

    Keywords

    trial periods; employment protection legislation; labor market flexibility; firm hiring;
    All these keywords.

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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