Do Industrial Disputes Reduce Employment? Evidence from South Africa
AbstractTheory predicts that an increase in employment protection may reduce employment levels by acting as a tax on firms by constraining hiring and firing decisions. We use a unique administrative database of the country’s dispute resolution body—the Commission for Conciliation, Mediation and Arbitration (CCMA)—to create a nuanced and empirically based measure of employment protection for the labor market in South Africa. Drawing on district-level labor force data, we evaluate the empirical link between industrial disputes, a function of quantity and efficiency parameters of the CCMA, and employment levels in the domestic labor market. We assume a positive relationship between the number of industrial disputes and the level of employment protection in the labor market. We utilize an augmented Lazear model, where a two-stage, endogeneity-corrected, least-square model is used to predict the impact of differentially measured indices of industrial disputes on time and regional variation in employment levels in South Africa. Our estimates suggest that an increase in industrial disputes, measured both in the number of industrial dispute cases brought to the CCMA and in the efficiency levels of this body, decreases regional-level employment in the South African labor market.
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Bibliographic InfoPaper provided by University of Cape Town, Development Policy Research Unit in its series Working Papers with number 13157.
Length: 21 pages
Date of creation: Feb 2013
Date of revision:
Publication status: Published in Working Paper Series by the Development Policy Research Unit and Africa Growth Initiative at Brookings, February 2013, pages 1-21
Employment; South Africa; Economic Development;
This paper has been announced in the following NEP Reports:
- NEP-AFR-2013-06-04 (Africa)
- NEP-ALL-2013-06-04 (All new papers)
- NEP-LAB-2013-06-04 (Labour Economics)
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