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Does Employment Protection Help Immigrants? Evidence from European Labor Markets

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  • Sa, Filipa

    ()
    (King's College London)

Abstract

High levels of employment protection reduce hiring and firing and have a theoretically ambiguous effect on the employment level. Immigrants, being new to the labor market, may be less aware of employment protection regulations and less likely to claim their rights, which may create a gap between the costs for employers of hiring a native relative to hiring an immigrant. This paper tests that hypothesis drawing on evidence for the EU and on two natural experiments for Spain and Italy. The results suggest that strict employment protection legislation (EPL) gives immigrants a comparative advantage relative to natives. Stricter EPL is found to reduce employment and reduce hiring and firing rates for natives. By contrast, stricter EPL has no effect on most immigrants and may even increase employment rates for those who have been in the country for a longer time.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3414.

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Length: 45 pages
Date of creation: Mar 2008
Date of revision:
Publication status: published in: Labour Economics, 2011, 18 (5), 624-642
Handle: RePEc:iza:izadps:dp3414

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Keywords: employment protection; immigration;

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References

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  1. 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.
  2. Adriana Kugler & Giovanni Pica, 2005. "Effects of Employment Protection on Worker and Job Flows: Evidence from the 1990 Italian Reform," NBER Working Papers 11658, National Bureau of Economic Research, Inc.
  3. 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.
  4. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  5. Pierre Cahuc & André Zylberberg, 2004. "Labor Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 026203316x, December.
  6. Adriana Kugler adkugler@uh.edu & Giovanni Pica, 2005. "The Effects of Employment Protection on the Italian Labour Market," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 135, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  7. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 110(462), pages C1-33, March.
  8. Pietro Garibaldi & Lia Pacelli & Andrea Borgarello, 2003. "Employment Protection Legislation and the Size of Firms," Working Papers 247, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  9. Pedro Portugal & Olivier Blanchard, 2001. "What Hides Behind an Unemployment Rate: Comparing Portuguese and U.S. Labor Markets," American Economic Review, American Economic Association, American Economic Association, vol. 91(1), pages 187-207, March.
  10. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, Elsevier, vol. 34(4), pages 851-879, June.
  11. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
  12. Joshua D. Angrist & Adriana D. Kugler, 2001. "Protective or counter-productive? Labor market institutions and the effect of immigration on EU natives," Economics Working Papers 587, Department of Economics and Business, Universitat Pompeu Fabra.
  13. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May.
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Cited by:
  1. Åsa Rosén & Steinar Holden, 2009. "Discrimination and Employment Protection," 2009 Meeting Papers, Society for Economic Dynamics 350, Society for Economic Dynamics.
  2. Nanos, Panagiotis & Schluter, Christian, 2014. "The composition of wage differentials between migrants and natives," European Economic Review, Elsevier, Elsevier, vol. 65(C), pages 23-44.
  3. Govert E. Bijwaard & Christian Schluter & Jackline Wahba, 2012. "The Impact of Labour Market Dynamics on the Return–Migration of Immigrants," CReAM Discussion Paper Series 1227, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  4. Anthony Edo, 2013. "The Impact of Immigration on Native Wages and Employment," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00881131, HAL.
  5. Vincent Corluy & Gerlinde Verbist, 2014. "Can education bridge the gap? Education and the employment position of immigrants in Belgium," ImPRovE Working Papers, Herman Deleeck Centre for Social Policy, University of Antwerp 14/02, Herman Deleeck Centre for Social Policy, University of Antwerp.
  6. Almosova, Anna, 2013. "Labor Market Institutions and The Effect of Immigration on National Employment," MPRA Paper 49785, University Library of Munich, Germany, revised 12 Sep 2013.
  7. Anthony Edo, 2013. "The Impact of Immigration on Native Wages and Employment," Documents de travail du Centre d'Economie de la Sorbonne, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne 13064, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.

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