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Employment Protection Reform, Enforcement in Collective Agreements and Worker Flows

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  • Heyman, Fredrik

    ()
    (Research Institute of Industrial Economics (IFN))

  • Skedinger, Per

    ()
    (Research Institute of Industrial Economics (IFN))

Abstract

Differential enforcement of employment protection by explicit design of the legislation, for example through exemptions for small firms, has been exploited in a growing body of research. However, little is known about the effects of differential enforcement that is not defined by the letter of the law, presumably due to the lack of data. Our study incorporates aspects of both types of differential enforcement as we combine the evaluation of a partial reform with information on the more difficult-to-observe enforcement of the same reform in collective agreements. We analyse a reform of notice periods for employer-initiated separations in Sweden, which reduced the notice periods for newly hired older workers substantially but implied minor or no changes in the notices for younger workers. The reform was initiated at different times depending on collective agreement. These circumstances provide ample opportunity for the identification of its effects. Our findings indicate heterogeneous effects across collective agreements. Despite differences in terms of dynamics and size, a positive effect on hirings is found for all agreements. In most cases, our results also show an increase in separations, indicating an increase in employment turnover. A salient feature of the results is that the estimated effects increase with the treatment dose, i.e., the size of the reduction in notice periods across different age groups.

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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 876.

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Length: 50 pages
Date of creation: 23 Jun 2011
Date of revision:
Handle: RePEc:hhs:iuiwop:0876

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Keywords: Employment protection; Hirings; Separations; Collective agreements; Matched employer-employee data;

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References

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  1. Heyman, Fredrik & Sjöholm, Fredrik & Gustavsson Tingvall, Patrik, 2006. "Is There Really A Foreign Ownership Wage Premium? Evidence From Matched Employer-Employee Data," EIJS Working Paper Series 230, The European Institute of Japanese Studies.
  2. Behaghel, Luc & Crépon, Bruno & Sédillot, Béatrice, 2008. "The perverse effects of partial employment protection reform: The case of French older workers," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 696-721, April.
  3. Pedro S. Martins, 2008. "Dismissals for cause: The difference that just eight paragraphs can make," Working Papers 24, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
  4. Schnalzenberger, Mario & Winter-Ebmer, Rudolf, 2009. "Layoff tax and employment of the elderly," Labour Economics, Elsevier, vol. 16(6), pages 618-624, December.
  5. Schivardi, Fabiano & Torrini, Roberto, 2008. "Identifying the effects of firing restrictions through size-contingent differences in regulation," Labour Economics, Elsevier, vol. 15(3), pages 482-511, June.
  6. Saint-Paul, Gilles, 2009. "Does the welfare state make older workers unemployable?," CEPR Discussion Papers 7490, C.E.P.R. Discussion Papers.
  7. von Below, David & Thoursie, Peter, 2008. "Last in, first out? Estimating the effect of seniority rules in Sweden," Working Paper Series 2008:27, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  8. Fredrik Heyman & Fredrik Sjöholm & Patrik Gustavsson Tingvall, 2011. "Multinationals, cross-border acquisitions and wage dispersion," Canadian Journal of Economics, Canadian Economics Association, vol. 44(2), pages 627-650, May.
  9. Kugler, Adriana & Pica, Giovanni, 2005. "Effects of Employment Protection on Worker and Job Flows: Evidence from the 1990 Italian Reform," IZA Discussion Papers 1743, Institute for the Study of Labor (IZA).
  10. Skedinger, Per, 2011. "Employment Consequences of Employment Protection Legislation," Working Paper Series 865, Research Institute of Industrial Economics.
  11. Lorenzo Cappellari & Carlo Dell'Aringa & Marco Leonardi, 2010. "Flexible Employment, Job Flows and Labour Productivity," DISCE - Quaderni dell'Istituto di Economia dell'Impresa e del Lavoro ieil0060, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  12. Fraisse, Henri & Kramarz, Francis & Prost, Corinne, 2011. "Labor Disputes and Labor Flows," IZA Discussion Papers 5677, Institute for the Study of Labor (IZA).
  13. Danielle Venn, 2009. "Legislation, Collective Bargaining and Enforcement: Updating the OECD Employment Protection Indicators," OECD Social, Employment and Migration Working Papers 89, OECD Publishing.
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