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

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  • 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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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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Cited by:
  1. Liina Malk, 2013. "Relaxation of employment protection and its effects on labour reallocation," Bank of Estonia Working Papers wp2013-4, Bank of Estonia, revised 04 Jun 2013.
  2. Caroli, Eve & Godard, Mathilde, 2014. "Does Job Insecurity Deteriorate Health? A Causal Approach for Europe," IZA Discussion Papers 8299, Institute for the Study of Labor (IZA).
  3. 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.
  4. Auray, Stéphane & Danthine, Samuel & Poschke, Markus, 2014. "Mandated versus Negotiated Severance Pay," IZA Discussion Papers 8422, Institute for the Study of Labor (IZA).
  5. Eve Caroli & Mathilde Godard, 2013. "Does Job Insecurity Deteriorate Health ? A Causal Approach for Europe," Working Papers 2013-13, Centre de Recherche en Economie et Statistique.

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