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Effects of Dismissal Protection Legislation on Individual Employment Stability in Germany

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Abstract

Changes in Dismissal Protection Legislation in Germany have been a subject to ongoing research in the past decade. The majority of these studies, however, has not been able to determine significant effects on job and worker flows in firms affected by the reforms. We estimate the impact of dismissal protection on individual employment stability using the 1999 reform as a "natural experiment".We provide insights into the effects of legislation on the firms’ matching behaviour. Our results hint at increased job security after the reform for those spells affected by it. This rise in stability was, however, accompanied by modest instability at start suggesting that firms facing additional firing costs tend to cease probation to shed unproductive job-worker matches. The latter effect, however, was not found to be significant.

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File URL: http://www.iaw.edu/RePEc/iaw/pdf/iaw_dp_45.pdf
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Bibliographic Info

Paper provided by Institut für Angewandte Wirtschaftsforschung (IAW) in its series IAW Discussion Papers with number 45.

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Length: 30 pages
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:iaw:iawdip:45

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Keywords: J32; J65; C41;

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  1. Boeri, Tito, 1998. "Enforcement of Employment Security Regulations, On-The-Job Search and Unemployment Duration," CEPR Discussion Papers 1850, C.E.P.R. Discussion Papers.
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  12. Saint-Paul, Gilles, 1991. "Dynamic labor demand with dual labor markets," Economics Letters, Elsevier, vol. 36(2), pages 219-222, June.
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  14. Pissarides, Christopher A., 2001. "Employment protection," Labour Economics, Elsevier, vol. 8(2), pages 131-159, May.
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