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The effects of employment protection: Learning from variable enforcement

  • Boeri, Tito
  • Jimeno, Juan F.

Employment protection legislations (EPL) are not enforced uniformly across the board. There are a number of exemptions to the coverage of these provisions: firms below a given threshold scale and workers with temporary contracts are not subject to the most restrictive provisions. This within-country variation in enforcement allows making inferences on the impact of EPL that go beyond the usual cross-country approach. In this Paper we develop a simple model that explains why these exemptions are in place to start with. Then we empirically assess the effects of EPL on dismissal probabilities, based on a double-difference approach. Our results are in line with the predictions of the theoretical model. Workers in firms exempted from EPL are more likely to be laid-off. We do not observe this effect in the case of temporary workers.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 49 (2005)
Issue (Month): 8 (November)
Pages: 2057-2077

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Handle: RePEc:eee:eecrev:v:49:y:2005:i:8:p:2057-2077
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