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Dismissal Protection and Worker Flows in Small Establishments

  • THOMAS K. BAUER
  • STEFAN BENDER
  • HOLGER BONIN

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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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0335.2006.00562.x
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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., 2005. "The effects of employment protection: Learning from variable enforcement," European Economic Review, Elsevier, vol. 49(8), pages 2057-2077, November.
  2. Burgess, Simon & Lane, Julia & Stevens, David, 2000. "Job Flows, Worker Flows, and Churning," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 473-502, July.
  3. Richard Layard & Stephen Nickell, 1998. "Labour Market Institutions and Economic Performance," CEP Discussion Papers dp0407, Centre for Economic Performance, LSE.
  4. 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.
  5. bertola, G. & Rogerson, R., 1996. "Institutions and Labor Reallocation," Papers 272, Banca Italia - Servizio di Studi.
  6. Verick, Sher, 2004. "Threshold Effects of Dismissal Protection Legislation in Germany," IZA Discussion Papers 991, Institute for the Study of Labor (IZA).
  7. Katherine G. Abraham & Susan N. Houseman, 1993. "Does Employment Protection Inhibit Labor Market Flexibility? Lessons from Germany, France and Belgium," Upjohn Working Papers and Journal Articles 93-16, W.E. Upjohn Institute for Employment Research.
  8. Andrea Borgarello & Pietro Garibaldi & Lia Pacelli, 2003. "Employment Protection Legislation and the Size of Firms," LABORatorio R. Revelli Working Papers Series 23, LABORatorio R. Revelli, Centre for Employment Studies.
  9. Mortensen, Dale T & Pissarides, Christopher, 1999. "New Developments in Models of Search in the Labour Market," CEPR Discussion Papers 2053, C.E.P.R. Discussion Papers.
  10. Ljungqvist, Lars, 1999. "How Do Layoff Costs Affect Employment?," SSE/EFI Working Paper Series in Economics and Finance 322, Stockholm School of Economics.
  11. John T. Addison & Paulino Teixeira, 2003. "The Economics of Employment Protection," Journal of Labor Research, Transaction Publishers, vol. 24(1), pages 85-129, January.
  12. Daron Acemoglu & Joshua Angrist, 1998. "Consequences of Employment Protection? The Case of the Americans with Disabilities Act," Working papers 98-13, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. 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.
  14. Pissarides, Christopher A., 2001. "Employment protection," Labour Economics, Elsevier, vol. 8(2), pages 131-159, May.
  15. Fernando Alvarez & Marcelo Veracierto, 1998. "Search, self-insurance and job-security provisions," Working Paper Series WP-98-2, Federal Reserve Bank of Chicago.
  16. 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.
  17. Giuseppe Bertola, 1991. "Labor Turnover Costs and Average Labor Demand," NBER Working Papers 3866, National Bureau of Economic Research, Inc.
  18. Samuel Bentolila & Giuseppe Bertola, 1990. "Firing Costs and Labour Demand: How Bad is Eurosclerosis?," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 381-402.
  19. Jennifer Hunt, 1994. "Firing Costs, Employment Fluctuations and Average Employment: An Examination of Germany," NBER Working Papers 4825, National Bureau of Economic Research, Inc.
  20. Edward P. Lazear, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 699-726.
  21. 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).
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