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Dismissal Protection and Worker Flows in Small Establishments


Based on a large employer-employee matched data-set, the paper investigates the effects of variable enforcement of German dismissal protection legislation on the employment dynamics in small establishments. Specifically, using a difference-in-differences approach, we study the effect of changes in the threshold scale exempting small establishments from dismissal protection provisions on worker flows. In contrast to the predictions of the theory, our results indicate that there are no statistically significant effects of dismissal protection legislation on worker turnover. Copyright (c) The London School of Economics and Political Science 2007.

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Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 74 (2007)
Issue (Month): 296 (November)
Pages: 804-821

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Handle: RePEc:bla:econom:v:74:y:2007:i:296:p:804-821
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  1. Boeri, Tito & Jimeno, Juan F, 2003. "The Effects of Employment Protection: Learning from Variable Enforcement," CEPR Discussion Papers 3926, C.E.P.R. Discussion Papers.
  2. John T. Addison & Paulino Teixeira, 2003. "The Economics of Employment Protection," Journal of Labor Research, Transaction Publishers, vol. 24(1), pages 85-129, January.
  3. Fernando Alvarez & Marcelo Veracierto, 1998. "Search, self-insurance and job-security provisions," Working Paper Series WP-98-2, Federal Reserve Bank of Chicago.
  4. Katharine G. Abraham & Susan N. Houseman, 1993. "Does Employment Protection Inhibit Labor Market Flexibility? Lessons from Germany, France, and Belgium," NBER Working Papers 4390, National Bureau of Economic Research, Inc.
  5. Garibaldi, Pietro & Pacelli, Lia & Borgarello, Andrea, 2003. "Employment Protection Legislation and the Size of Firms," IZA Discussion Papers 787, Institute for the Study of Labor (IZA).
  6. Bertola, Giuseppe, 1992. "Labor Turnover Costs and Average Labor Demand," Journal of Labor Economics, University of Chicago Press, vol. 10(4), pages 389-411, October.
  7. Jaime Saavedra-Chanduví & Máximo Torero, 2000. "Labor Market Reforms and Their Impact on Formal Labor Demand and Job Market Turnover: The Case of Peru," Research Department Publications 3095, Inter-American Development Bank, Research Department.
  8. Pissarides, Christopher A., 2001. "Employment protection," Labour Economics, Elsevier, vol. 8(2), pages 131-159, May.
  9. Wagner, Joachim & Schnabel, Claus & Kölling, Arnd, 2001. "Threshold Values in German Labor Law and Job Dynamics in Small Firms: The Case of the Disability Law," IZA Discussion Papers 386, Institute for the Study of Labor (IZA).
  10. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
  11. John Haltiwanger & Steven J. Davis, 1999. "On the Driving Forces behind Cyclical Movements in Employment and Job Reallocation," American Economic Review, American Economic Association, vol. 89(5), pages 1234-1258, December.
  12. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
  13. Daron Acemoglu & Joshua Angrist, 1998. "Consequences of Employment Protection? The Case of the Americans with Disabilities Act," NBER Working Papers 6670, National Bureau of Economic Research, Inc.
  14. Simon Burgess & Julia Lane & David Stevens, 1996. "Job Flows, Worker Flows and Churning," Labor and Demography 9604004, EconWPA.
  15. Bertola, Giuseppe & Rogerson, Richard, 1996. "Institutions and Labour Reallocation," CEPR Discussion Papers 1519, C.E.P.R. Discussion Papers.
  16. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
  17. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier.
  18. Jennifer Hunt, 1994. "Firing Costs, Employment Fluctuations and Average Employment: An Examination of Germany," NBER Working Papers 4825, National Bureau of Economic Research, Inc.
  19. Verick, Sher, 2004. "Threshold Effects of Dismissal Protection Legislation in Germany," IZA Discussion Papers 991, Institute for the Study of Labor (IZA).
  20. Daniel S. Hamermesh, 1986. "The Demand for Workers and Hours and the Effects of Job Security Policies: Theory and Evidence," NBER Working Papers 2056, National Bureau of Economic Research, Inc.
  21. Lars Ljungqvist, 2002. "How Do Lay--off Costs Affect Employment?," Economic Journal, Royal Economic Society, vol. 112(482), pages 829-853, October.
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