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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 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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Bibliographic Info

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

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Length: 31 pages
Date of creation: Oct 2009
Date of revision:
Publication status: published in: Labour Economics, 2010, 17 (1), 16-26
Handle: RePEc:iza:izadps:dp4465

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Keywords: term of notice; employment protection; wages;

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References

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  1. William Kerr & Adriana Kugler & David Autor, 2007. "Do Employment Protections Reduce Productivity? Evidence from U.S. States," Working Papers 07-04, Center for Economic Studies, U.S. Census Bureau.
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  11. Martins, Pedro S., 2007. "Dismissals for Cause: The Difference That Just Eight Paragraphs Can Make," IZA Discussion Papers 3112, Institute for the Study of Labor (IZA).
  12. 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).
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  19. Michael Wallerstein & Miriam Golden & Peter Lange, 1997. "Unions, employer associations, and wage-setting institutions in northern and central Europe, 1950û1992," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 50(3), pages 379-401, April.
  20. Pissarides, Christopher A., 2001. "Employment protection," Labour Economics, Elsevier, vol. 8(2), pages 131-159, May.
  21. Manishi Prasad & Peter Wahlqvist & Rich Shikiar & Ya-Chen Tina Shih, 2004. "A," PharmacoEconomics, Springer Healthcare | Adis, vol. 22(4), pages 225-244.
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Citations

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Cited by:
  1. Marco Leonardi & Giovanni Pica, 2010. "Who Pays for it? The Heterogeneous Wage Effects of Employment Protection Legislation," CSEF Working Papers 265, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 13 May 2012.
  2. Cervini, María & Ramos, Xavier & Silva, José I., 2011. "Wage effects of non-wage labour costs," MPRA Paper 34033, University Library of Munich, Germany.
  3. Alessio J. G. Brown & Dennis Snower, 2009. "Incentives and Complementarities of Flexicurity," Kiel Working Papers 1526, Kiel Institute for the World Economy.
  4. Marco Leonardi & Giovanni Pica, 2007. "Employment Protection Legislation and Wages," CSEF Working Papers 175, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  5. Bosio, Giulio, 2009. "Temporary employment and wage gap with permanent jobs: evidence from quantile regression," MPRA Paper 16055, University Library of Munich, Germany.
  6. Wiel, K.M. van der, 2009. "Essays on Expectations, Power and Social Security," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3710369, Tilburg University.
  7. 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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