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The Effects of Employment Protection: Learning from Variable Enforcement

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  • Boeri, Tito
  • Jimeno, Juan Francisco

Abstract

Employment protection legislations (EPL) are not enforced uniformly across the board. There are a number of exemptions to the coverage of these provisions: firms below a given threshold scale and workers with temporary contracts are not subject to the most restrictive provisions. This within-country variation in enforcement allows making inferences on the impact of EPL that go beyond the usual cross-country approach. In this Paper we develop a simple model that explains why these exemptions are in place to start with. Then we empirically assess the effects of EPL on dismissal probabilities, based on a double-difference approach. Our results are in line with the predictions of the theoretical model. Workers in firms exempted from EPL are more likely to be laid-off. We do not observe this effect in the case of temporary workers.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3926.

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Date of creation: Jun 2003
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Handle: RePEc:cpr:ceprdp:3926

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Keywords: efficiency wages; employment protection; job loss;

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References

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  1. Kugler, Adriana & Pica, Giovanni, 2003. "Effects of Employment Protection and Product Market Regulations on the Italian Labor Market," IZA Discussion Papers 948, Institute for the Study of Labor (IZA).
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  8. Garibaldi, Pietro & Pacelli, Lia & Borgarello, Andrea, 2003. "Employment Protection Legislation and the Size of Firms," IZA Discussion Papers 787, Institute for the Study of Labor (IZA).
  9. Adriana D. Kugler & Gilles Saint Paul, 2000. "Hiring and firing costs, adverse selection and long-term unemployment," Economics Working Papers 447, Department of Economics and Business, Universitat Pompeu Fabra.
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  17. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
  18. Gregg, Paul & Manning, Alan, 1997. "Skill-biassed change, unemployment and wage inequality," European Economic Review, Elsevier, vol. 41(6), pages 1173-1200, June.
  19. Adriana Kugler & Giovanni Pica, 2003. "The Effects of Employment Protection and Product Market Regulations on the Italian Labor Market," LABORatorio R. Revelli Working Papers Series 28, LABORatorio R. Revelli, Centre for Employment Studies.
  20. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-59, October.
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  22. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier.
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