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Dismissal Protection and Worker Flows in OECD Countries: Evidence from Cross-Country/Cross-Industry Data

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Author Info

  • Bassanini, Andrea

    () (OECD)

  • Garnero, Andrea

    () (Paris School of Economics)

Abstract

Exploiting a unique dataset including cross-country comparable hiring and separation rates by type of transition for 24 OECD countries, 23 business-sector industries and 13 years, we study the effect of dismissal regulations on different types of gross worker flows, defined as one-year transitions. We use both a difference-in-difference approach – in which the impact of regulations is identified by exploiting likely cross-industry differences in their impact – and standard time-series analysis – in which the effect of regulations is identified through regulatory changes over time. We find that the more restrictive the regulation, the smaller is the rate of within-industry job-to-job transitions, in particular towards permanent jobs. By contrast, we find no significant effect as regards separations involving an industry change or persistent joblessness. The extent of reinstatement in the case of unfair dismissal appears to be the most important regulatory determinant of gross worker flows. We also present a large battery of robustness checks that suggest that our findings are robust.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6535.

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Length: 45 pages
Date of creation: Apr 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6535

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Related research

Keywords: reinstatement; unfair dismissals; job-to-job transitions; employment protection legislation; industry-specific human capital; resource reallocation; gross worker flows; cross-country data;

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References

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  1. Bassanini, Andrea & Nunziata, Luca & Venn, Danielle, 2008. "Job Protection Legislation and Productivity Growth in OECD Countries," IZA Discussion Papers 3555, Institute for the Study of Labor (IZA).
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  16. Kugler, Adriana & Pica, Giovanni, 2008. "Effects of employment protection on worker and job flows: Evidence from the 1990 Italian reform," Labour Economics, Elsevier, vol. 15(1), pages 78-95, February.
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  18. Philip Bodman, 2009. "Output volatility in Australia," Applied Economics, Taylor and Francis Journals, vol. 41(24), pages 3117-3129.
  19. Gregory, Mary & Jukes, Robert, 2001. "Unemployment and Subsequent Earnings: Estimating Scarring among British Men 1984-94," Economic Journal, Royal Economic Society, vol. 111(475), pages F607-25, November.
  20. Andrea Bassanini & Romain Duval, 2009. "Unemployment, institutions, and reform complementarities: re-assessing the aggregate evidence for OECD countries," Oxford Review of Economic Policy, Oxford University Press, vol. 25(1), pages 40-59, Spring.
  21. Andrea Ichino & Michele Polo & Enrico Rettore, . "Are Judges Biased by Labor Market Conditions?," Working Papers 192, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  22. Ton van Schaik & Theo van de Klundert, 2013. "Employment protection legislation and catching-up," Applied Economics, Taylor and Francis Journals, vol. 45(8), pages 973-981, March.
  23. Schivardi, Fabiano & Torrini, Roberto, 2008. "Identifying the effects of firing restrictions through size-contingent differences in regulation," Labour Economics, Elsevier, vol. 15(3), pages 482-511, June.
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Cited by:
  1. Andrea Bassanini, 2011. "Aggregate Earnings and Macroeconomic Shocks: The Role of Labour Market Policies and Institutions," OECD Social, Employment and Migration Working Papers 123, OECD Publishing.

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