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How does employment protection legislation influence hiring and firing decisions by the smallest firms?

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  • Millán, Ana
  • Millán, José María
  • Román, Concepción
  • van Stel, André

Abstract

This paper examines the impact of employment protection legislation (EPL) on hiring decisions by own-account workers and firing decisions by very small firms (one to four employees). Using data from the EU-15 countries, our results show that the strictness of employment protection legislation is negatively related to both these types of decisions, and hence, to labour mobility among the smallest firms. This new evidence may be useful for governments aiming to create a more enabling macro-environment for employment and productivity growth.

Suggested Citation

  • Millán, Ana & Millán, José María & Román, Concepción & van Stel, André, 2013. "How does employment protection legislation influence hiring and firing decisions by the smallest firms?," Economics Letters, Elsevier, vol. 121(3), pages 444-448.
  • Handle: RePEc:eee:ecolet:v:121:y:2013:i:3:p:444-448 DOI: 10.1016/j.econlet.2013.09.021
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Albiol, Judit, 2014. "The Significance of Business Exit for Future Entrepreneurial Activity," Working Papers 2072/238221, Universitat Rovira i Virgili, Department of Economics.
    2. repec:ces:ifodic:v:14:y:2016:i:3:p:19255698 is not listed on IDEAS
    3. Ana Millán & José María Millán & Concepción Román, 2016. "The Role of Start-up Incentives on Entrepreneurship Dynamics in a Post-Crisis Era: Evidence from European Countries," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 14(3), pages 29-35, October.
    4. Alex Coad & Kristian Nielsen & Bram Timmermans, 2017. "My first employee: an empirical investigation," Small Business Economics, Springer, vol. 48(1), pages 25-45, January.
    5. Albiol, Judit & Díaz Serrano, Lluís & Teruel, Mercedes, 2014. "Is Self-employment a Way to Escape from Skill Mismatches?," Working Papers 2072/247652, Universitat Rovira i Virgili, Department of Economics.
    6. repec:cii:cepiei:2014-q2-138-2 is not listed on IDEAS
    7. W.J. Liebregts & F.C. Stam, 2016. "Employment protection and entrepreneurship : Unpacking the effects of employment protection legislation on the allocation of entrepreneurial activity in society," Working Papers 16-08, Utrecht School of Economics.
    8. Millán, José María & Congregado, Emilio & Román, Concepción, 2014. "Persistence in entrepreneurship and its implications for the European entrepreneurial promotion policy," Journal of Policy Modeling, Elsevier, vol. 36(1), pages 83-106.
    9. Albiol Sanchez, Judit & Diaz-Serrano, Luis & Teruel, Graciela, 2015. "Is Self-employment a Way to Escape from Skill Mismatches?," IZA Discussion Papers 9008, Institute for the Study of Labor (IZA).
    10. André Stel & José Millán & Concepción Román, 2014. "Investigating the impact of the technological environment on survival chances of employer entrepreneurs," Small Business Economics, Springer, vol. 43(4), pages 839-855, December.
    11. Jose Maria Millan & Emilio Congregado & Concepcion Roman & Mirjam van Praag & Andre van Stel, 2011. "The Value of an Educated Population for an Individual's Entrepreneurship Success," Tinbergen Institute Discussion Papers 11-066/3, Tinbergen Institute, revised 06 May 2014.

    More about this item

    Keywords

    Self-employment; Hiring; Firing; Employment protection legislation;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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