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Employment Protection and Gross Job Flows1

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Author Info
Alejandro Micco - Carmen Pages

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Abstract

This paper examines the empirical relation between employment protection regulation and gross job flows in a sample of developed and developing countries. By implementing a difference in difference test we avoid the potentially severe endogeneity and omitted variable problems associated with cross-country regressions. This test is based on the hypothesis that job security regulations are more binding in some sectors of economic activity than in others depending on sector-specific characteristics such as product demand volatility or factor specificity. Unlike most of the existing literature, our analysis indicates that more stringent job security regulations slow down job reallocation. This is more so in sectors that require higher labor flexibility. These effects occur within the sample of developed and developing countries and are large in magnitude. Moreover, they are robust to changes in regulatory measures, measurement of sector flexibility requirements, control variables and samples. In contrast, regulations on firm entry and exit seem to play a limited role in reducing job flow

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Publisher Info
Paper provided by Econometric Society in its series Econometric Society 2004 Latin American Meetings with number 295.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:latm04:295

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Related research
Keywords: Employment Protection policies; Job Creation; Job Destruction; Employment flows and Firm entry and Exit.;

Find related papers by JEL classification:
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Private Pensions
J63 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Turnover; Vacancies; Layoffs

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Matthew Barnes & Jonathan Haskel, 2002. "Job Creation, Job Destruction and the Contribution of Small Businesses: Evidence for UK Manufacturing," Working Papers 461, Queen Mary, University of London, Department of Economics. [Downloadable!]
  2. Bergoeing, Raphael & Repetto, Andrea & Edwards, Sebastian, 2004. "Productivity dynamics," Journal of Development Economics, Elsevier, vol. 75(2), pages 329-332, December. [Downloadable!] (restricted)
  3. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June. [Downloadable!] (restricted)
  4. Adriana Kugler & Juan F. Jimeno & Virginia Hernanz, 2002. "Employment Consequences of Restrictive Permanent Contracts: Evidence from Spanish Labor Market Reforms," Economics Working Papers 651, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  5. Bertola, Giuseppe & Rogerson, Richard, 1997. "Institutions and labor reallocation," European Economic Review, Elsevier, vol. 41(6), pages 1147-1171, June. [Downloadable!] (restricted)
    Other versions:
  6. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October. [Downloadable!] (restricted)
  7. Eduardo Lora, 2001. "Structural Reforms in Latin America: What Has Been Reformed and How to Measure It," RES Working Papers 4293, Inter-American Development Bank, Research Department. [Downloadable!]
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  8. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed The Labor Market?," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1169-1213, November. [Downloadable!] (restricted)
    Other versions:
  9. Alex Grey, 1995. "Job Gains and Job Losses: Recent Literature and Trends," OECD Jobs Study Working Papers 1, OECD, Directorate for Employment, Labour and Social Affairs. [Downloadable!]
  10. Timothy Dunne & John Haltiwanger & John Baldwin, 1994. "A Comparison of Job Creation and Job Destruction in Canada and the United States," Working Papers 94-2, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
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  11. Claessens, Stijn & Laeven, Luc, 2002. "Financial Development, Property Rights and Growth," CEPR Discussion Papers 3295, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  12. Olivier Blanchard & Pedro Portugal, 2001. "What Hides Behind an Unemployment Rate: Comparing Portuguese and U.S. Labor Markets," American Economic Review, American Economic Association, vol. 91(1), pages 187-207, March. [Downloadable!] (restricted)
  13. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932.
  14. Marcela Meléndez & Katja Seim & Pablo Medina, 2003. "Productivity Dynamics Of The Colombian Manufacturing Sector," DOCUMENTOS CEDE 003389, UNIVERSIDAD DE LOS ANDES-CEDE. [Downloadable!]
  15. Caballero, Ricardo J & Engel, Eduardo M R A & Haltiwanger, John, 1997. "Aggregate Employment Dynamics: Building from Microeconomic Evidence," American Economic Review, American Economic Association, vol. 87(1), pages 115-37, March. [Downloadable!] (restricted)
    Other versions:
  16. Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084 Elsevier. [Downloadable!] (restricted)
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  17. Marcela Meléndez & Katja Seim & Pablo Medina, 2003. "Productivity Dynamics Of The Colombian Manufacturing Sector," DOCUMENTOS CEDE 003390, UNIVERSIDAD DE LOS ANDES-CEDE. [Downloadable!]
  18. Nickell, Stephen, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer. [Downloadable!] (restricted)
  19. Davis, Steven J. & Haltiwanger, John, 1999. "Gross job flows," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 41, pages 2711-2805 Elsevier. [Downloadable!] (restricted)
  20. Pietro Garibaldi & Paolo Mauro, 2002. "Anatomy of employment growth," Economic Policy, CEPR, CES, MSH, vol. 17(34), pages 67-114, 04. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Markus Poschke, 2007. "Employment Protection, Firm Selection, and Growth," IZA Discussion Papers 3164, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Haltiwanger, John & Kugler, Adriana & Kugler, Maurice & Micco, Alejandro & Pagés, Carmen, 2004. "Effects of Tariffs and Real Exchange Rates on Job Reallocation:Evidence from Latin America," Discussion Paper Series In Economics And Econometrics 0410, Economics Division, School of Social Sciences, University of Southampton. [Downloadable!]
    Other versions:
  3. Haltiwanger, John & Scarpetta, Stefano & Schweiger, Helena, 2006. "Assessing job flows across countries : the role of industry, firm size, and regulations," Policy Research Working Paper Series 4070, The World Bank. [Downloadable!]
    Other versions:
  4. Alejandro Micco & Carmen Pagés, 2006. "The Economic Effects of Employment Protection: Evidence from International Industry-Level Data," IZA Discussion Papers 2433, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  5. Rita Almeida & Pedro Carneiro, 2007. "Inequality and Employment in a Dual Economy: Enforcement of Labor Regulation in Brazil," IZA Discussion Papers 3094, Institute for the Study of Labor (IZA). [Downloadable!]
  6. Jaime Gatica & Pilar Romaguera, 2005. "El Mercado Laboral en Chile Nuevos Temas y Desafíos," Documentos de Trabajo 210, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
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This page was last updated on 2009-12-2.

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