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Better Protected, Better Paid: Evidence on How Employment Protection Affects Wages

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  • van der Wiel, Karen

    ()
    (CPB Netherlands Bureau for Economic Policy Analysis)

Abstract

This paper empirically establishes the effect of the employer's term of notice on the wage level of employees. The term of notice is defined as the period an employer has to notify workers in advance of their up-coming dismissal. The wages paid during this period are an important element of firing costs and hence employment protection. To find a causal effect, I exploit the exogenous change in the term of notice that resulted from the introduction of a new Dutch law in 1999. Strong evidence is found that a longer ‘dormant’ term of notice leads to higher wages. In my sample, an additional month of notice increases wages by three percent, ceteris paribus.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3352.

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Length: 26 pages
Date of creation: Feb 2008
Date of revision:
Handle: RePEc:iza:izadps:dp3352

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Keywords: wages; employment protection; fixed effects;

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References

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  1. Leonardi, Marco & Pica, Giovanni, 2010. "Who Pays for It? The Heterogeneous Wage Effects of Employment Protection Legislation," IZA Discussion Papers 5335, Institute for the Study of Labor (IZA).
  2. William Kerr & Adriana Kugler & David Autor, 2007. "Do Employment Protections Reduce Productivity? Evidence from U.S. States," Working Papers, Center for Economic Studies, U.S. Census Bureau 07-04, Center for Economic Studies, U.S. Census Bureau.
  3. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, Elsevier, vol. 34(4), pages 851-879, June.
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  17. Pedro S. Martins, 2008. "Dismissals for cause: The difference that just eight paragraphs can make," Working Papers, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research 24, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
  18. Leonardi, Marco & Pica, Giovanni, 2007. "Employment protection legislation and wages," Working Paper Series, European Central Bank 0778, European Central Bank.
  19. Manishi Prasad & Peter Wahlqvist & Rich Shikiar & Ya-Chen Tina Shih, 2004. "A," PharmacoEconomics, Springer Healthcare | Adis, Springer Healthcare | Adis, vol. 22(4), pages 225-244.
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  21. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 105(3), pages 699-726, August.
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Citations

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Cited by:
  1. Marco Leonardi & Giovanni Pica, 2007. "Employment Protection Legislation and Wages," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 175, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  2. Federico Cingano & Marco Leonardi & Julián Messina & Giovanni Pica, 2014. "Employment protection legislation, capital investment and access to credit: evidence from Italy," Working Papers, Department of the Treasury, Ministry of the Economy and of Finance 4, Department of the Treasury, Ministry of the Economy and of Finance.
  3. Wiel, K.M. van der, 2009. "Essays on Expectations, Power and Social Security," Open Access publications from Tilburg University, Tilburg University urn:nbn:nl:ui:12-3710369, Tilburg University.
  4. Alessio J. G. Brown & Dennis Snower, 2009. "Incentives and Complementarities of Flexicurity," Kiel Working Papers, Kiel Institute for the World Economy 1526, Kiel Institute for the World Economy.
  5. Cervini-Plá, María & Ramos, Xavi & Silva, José I., 2010. "Wage Effects of Non-Wage Labour Costs," IZA Discussion Papers 4882, Institute for the Study of Labor (IZA).
  6. Marco Leonardi & Giovanni Pica, 2010. "Who Pays for it? The Heterogeneous Wage Effects of Employment Protection Legislation," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 265, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 13 May 2012.
  7. Bosio, Giulio, 2009. "Temporary employment and wage gap with permanent jobs: evidence from quantile regression," MPRA Paper 16055, University Library of Munich, Germany.
  8. Salverda, Wiemer & Checchi, Daniele, 2014. "Labour-Market Institutions and the Dispersion of Wage Earnings," IZA Discussion Papers 8220, Institute for the Study of Labor (IZA).

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