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Job Flow Dynamics and Firing Restrictions: Evidence from Europe

  • Julián Messina
  • Giovanna Vallanti

We exploit homogeneous firm level data of manufacturing and non-manufacturing industries to study the impact of firing restrictions on job flow dynamics across 14 European countries. Our results suggest that more stringent firing laws dampen the response of job destruction to the cycle, thus making job turnover less counter-cyclical. Moreover, stricter EPL reduces both the creation and destruction of jobs in declining sectors relative to expanding sectors, implying that faster trend growth attenuates the impact of firing costs on firm's hiring and firing decisions. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.

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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 117 (2007)
Issue (Month): 521 (06)
Pages: 279-301

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Handle: RePEc:ecj:econjl:v:117:y:2007:i:521:p:279-301
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