Relaxed Dismissal Protection: Effects on the Hiring and Firing Behaviour of Small Firms
AbstractSmall firms are seen as important drivers of dynamics and innovation. They need to be particularly flexible and be able to react quickly to new challenges. This paper uses the latest change in dismissal protection legislation in Germany as a natural experiment and tries to find causal effects on the hiring and firing behaviour of small firms. Using a difference-in-differences approach, I find only small but positive effects on the total number of hirings. However, there are substantial substitution effects from temporary contract hirings to permanent contract hirings. The results remain robust when using count data models and applying fixed effects specifications.
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Bibliographic InfoPaper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2009-015.
Date of creation: 20 Feb 2009
Date of revision:
Employment Protection; Small Business; Worker Flows;
Find related papers by JEL classification:
- J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
- K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
- M21 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - Business Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-28 (All new papers)
- NEP-EEC-2009-02-28 (European Economics)
- NEP-ENT-2009-02-28 (Entrepreneurship)
- NEP-LAW-2009-02-28 (Law & Economics)
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- Bornhäll, Anders & Daunfeldt, Sven-Olov & Rudholm, Niklas, 2014. "Employment Protection Legislation and Firm Growth: Evidence from a Natural Experiment," HUI Working Papers 102, HUI Research.
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