Small 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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Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics, Thueringer Universitaets- und Landesbibliothek in its series Jena Economic Research Papers in Economics with number
2009-015.
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
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