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Dismissal Protection and Worker Flows in OECD Countries: Evidence from Cross-country/Cross-industry Data

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  • Bassanini, Andrea
  • Garnero, Andrea

Abstract

Exploiting a unique dataset including cross-country comparable hiring and separation rates by type of transition for 24 OECD countries, 23 business-sector industries and 13 years, we study the effect of dismissal regulations on different types of gross worker flows, defined as one-year transitions. We use both a difference-in-difference approach – in which the impact of regulations is identified by exploiting likely cross-industry differences in their impact – and standard time-series analysis – in which the effect of regulations is identified through regulatory changes over time. We find that the more restrictive the regulation, the smaller is the rate of within-industry job-to-job transitions, in particular towards permanent jobs. By contrast, we find no significant effect as regards separations involving an industry change or leading to non-employment. The extent of reinstatement in the case of unfair dismissal appears to be the most important regulatory determinant of gross worker flows. We also present a large battery of robustness checks that suggest that our findings are robust.

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Bibliographic Info

Paper provided by CEPREMAP in its series CEPREMAP Working Papers (Docweb) with number 1211.

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Length: 46 pages
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:cpm:docweb:1211

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Keywords: gross worker flows; industry-specific human capital; job-to-job transitions; EPL; reinstatement; cross-country data;

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Cited by:
  1. Caroli, Eve & Godard, Mathilde, 2014. "Does Job Insecurity Deteriorate Health? A Causal Approach for Europe," IZA Discussion Papers 8299, Institute for the Study of Labor (IZA).
  2. Andrea Bassanini, 2011. "Aggregate Earnings and Macroeconomic Shocks: The Role of Labour Market Policies and Institutions," OECD Social, Employment and Migration Working Papers 123, OECD Publishing.
  3. Eve Caroli & Mathilde Godard, 2013. "Does Job Insecurity Deteriorate Health ? A Causal Approach for Europe," Working Papers 2013-13, Centre de Recherche en Economie et Statistique.
  4. Liina Malk, 2013. "Relaxation of employment protection and its effects on labour reallocation," Bank of Estonia Working Papers wp2013-4, Bank of Estonia, revised 04 Jun 2013.

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