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

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Author Info
van der Wiel, Karen () (CPB Netherlands Bureau for Economic Policy Analysis)

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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 upcoming 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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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4465.

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Date of creation: Oct 2009
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Publication status: forthcoming in: Labour Economics, 2009
Handle: RePEc:iza:izadps:dp4465

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Related research
Keywords: employment protection; term of notice; wages;

Other versions of this item:

Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
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. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June. [Downloadable!] (restricted)
  2. Marco Leonardi & Giovanni Pica, 2007. "Employment protection legislation and wages," Working Paper Series 778, European Central Bank. [Downloadable!]
    Other versions:
  3. 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)
    Other versions:
  4. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August. [Downloadable!] (restricted)
  5. Assar Lindbeck & Dennis J. Snower, 2001. "Insiders versus Outsiders," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 165-188, Winter. [Downloadable!] (restricted)
  6. Bertola, Giuseppe & Rogerson, Richard, 1997. "Institutions and labor reallocation," European Economic Review, Elsevier, vol. 41(6), pages 1147-1171, June. [Downloadable!] (restricted)
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  7. Blanchflower, David G & Oswald, Andrew J & Garrett, Mario D, 1990. "Insider Power in Wage Determination," Economica, London School of Economics and Political Science, vol. 57(226), pages 143-70, May. [Downloadable!] (restricted)
    Other versions:
  8. Wiji Arulampalam & Alison L. Booth & Mark L. Bryan, 2004. "Training in Europe," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 346-360, 04/05. [Downloadable!] (restricted)
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  9. Pietro Garibaldi & Giovanni L. Violante, 2005. "The Employment Effects of Severance Payments with Wage Rigidities," Economic Journal, Royal Economic Society, vol. 115(506), pages 799-832, October. [Downloadable!] (restricted)
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  10. David H. Autor & William R. Kerr & Adriana D. Kugler, 2007. "Do Employment Protections Reduce Productivity? Evidence from U.S. States," IZA Discussion Papers 2571, Institute for the Study of Labor (IZA). [Downloadable!]
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  11. Altonji, Joseph G & Shakotko, Robert A, 1987. "Do Wages Rise with Job Seniority?," Review of Economic Studies, Blackwell Publishing, vol. 54(3), pages 437-59, July. [Downloadable!] (restricted)
    Other versions:
  12. Lindbeck, Assar & Snower, Dennis J, 1986. "Wage Setting, Unemployment, and Insider-Outsider Relations," American Economic Review, American Economic Association, vol. 76(2), pages 235-39, May.
  13. Walter Y. Oi, 1962. "Labor as a Quasi-Fixed Factor," Journal of Political Economy, University of Chicago Press, vol. 70, pages 538. [Downloadable!] (restricted)
  14. Holmlund, Bertil & Zetterberg, Johnny, 1991. "Insider effects in wage determination : Evidence from five countries," European Economic Review, Elsevier, vol. 35(5), pages 1009-1034, July. [Downloadable!] (restricted)
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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. Alessio J. G. Brown & Dennis Snower, 2009. "Incentives and Complementarities of Flexicurity," Kiel Working Papers 1526, Kiel Institute for the World Economy. [Downloadable!]
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