Threshold Effects of Dismissal Protection Legislation in Germany
AbstractIn this paper we use a reform in the applicability of the Protection Against Dismissal Act or Kündigungsschutzgesetz in Germany to identify employment effects of the legislation for small establishments. Using a panel of establishments for the period 1997-2001, we find some evidence that a tightening of the threshold resulted in a higher probability of persistence and a lower probability of growth for the units in the treatment group during the post-reform years. When using the establishment size as according to the legislation, the effects were the strongest for establishments which were further away from the threshold. This result could reflect the presence of other institutional barriers or adjustment costs than those imposed by the Act. Alternatively, small establishments are unlikely to have perfect information regarding the applicability of the legislation. This is somewhat supported by the results when taking all employees as the measure for the establishment size. However, there is also some evidence that these results are being driven by other factors than the reform of the legislation.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 991.
Length: 45 pages
Date of creation: Jan 2004
Date of revision:
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Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Find related papers by JEL classification:
- J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- J58 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Public Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-08 (All new papers)
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