Employment-At-Will Exceptions and Jobless Recovery
AbstractIn this paper I study the effects on jobless recovery of diminishing the power of an employer to fire an employee through Employment-At-Will Exceptions (EWEs). I do so by using a dynamic panel with quarterly data ranging from 1976 to 2010 for the 50 states in the United States. I test both changes in state unemployment rates and state-weighted GDP growth in single variable regressions and VAR regressions. My contribution to the literature is threefold. First, I show two of the three EWEs contribute significantly to jobless recovery in the U.S. The statistical tests in this paper show that Implied Contract Exceptions slow decreases in the unemployment rate during recovery from recession by between 0.025 and 0.033 percentage points per quarter, and Covenant of Good Faith and Fair Dealing Exceptions do so by between 0.039 and 0.055 percentage points per quarter. Second, I lend support to the predictions of theory that increased firing costs decrease the rate of hiring during recoveries. Third, I resolve differences in the various sources documenting the three types of EWEs in different states.
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Bibliographic InfoPaper provided by LeBow College of Business, Drexel University in its series School of Economics Working Paper Series with number 2013-1.
Length: 40 pages
Date of creation: 29 Jul 2013
Date of revision:
Employment at will; jobless recovery;
Find related papers by JEL classification:
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
- J83 - Labor and Demographic Economics - - Labor Standards - - - Workers' Rights
- K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
- K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-18 (All new papers)
- NEP-LAB-2013-10-18 (Labour Economics)
- NEP-MAC-2013-10-18 (Macroeconomics)
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