Partial employment protection and perceived job security: evidence from France

This paper assesses the causal effect of partial employment protection on workers’ subjective job security via the perceived probability of layoff. We consider the rise in the French Delalande tax, which is paid by private firms if they lay off older workers. This reform was restricted to large firms and therefore allows us to use a difference-in-differences strategy. In ECHP data, we find that the change in the perceived probability of layoffs induced by the higher Delalande tax improved the subjective job security of older (protected) workers, but at the cost of a negative externality on other workers. The changes in job security in both groups are of similar size, but as unprotected workers are the large majority of the sample, the population effect of the tax on layoffs was to reduce job security.