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Employment Protection and Gross Job Flows1

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  • Alejandro Micco - Carmen Pages

Abstract

This paper examines the empirical relation between employment protection regulation and gross job flows in a sample of developed and developing countries. By implementing a difference in difference test we avoid the potentially severe endogeneity and omitted variable problems associated with cross-country regressions. This test is based on the hypothesis that job security regulations are more binding in some sectors of economic activity than in others depending on sector-specific characteristics such as product demand volatility or factor specificity. Unlike most of the existing literature, our analysis indicates that more stringent job security regulations slow down job reallocation. This is more so in sectors that require higher labor flexibility. These effects occur within the sample of developed and developing countries and are large in magnitude. Moreover, they are robust to changes in regulatory measures, measurement of sector flexibility requirements, control variables and samples. In contrast, regulations on firm entry and exit seem to play a limited role in reducing job flow

Suggested Citation

  • Alejandro Micco - Carmen Pages, 2004. "Employment Protection and Gross Job Flows1," Econometric Society 2004 Latin American Meetings 295, Econometric Society.
  • Handle: RePEc:ecm:latm04:295
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    File URL: http://repec.org/esLATM04/up.26873.1082085066.pdf
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    References listed on IDEAS

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    Cited by:

    1. Micco, Alejandro & Pagés, Carmen, 2006. "The Economic Effects of Employment Protection: Evidence from International Industry-Level Data," IZA Discussion Papers 2433, Institute of Labor Economics (IZA).
    2. Stefan Jestl & Michael Landesmann & Sandra M. Leitner, 2015. "Migrants and Natives in EU Labour Markets: Mobility and Job-Skill Mismatch Patterns," wiiw Research Reports 403, The Vienna Institute for International Economic Studies, wiiw.
    3. Haltiwanger, John & Kugler, Adriana & Kugler, Maurice & Micco, Alejandro & Pagés, Carmen, 2004. "Effects of tariffs and real exchange rates on job reallocation: evidence from Latin America," Discussion Paper Series In Economics And Econometrics 0410, Economics Division, School of Social Sciences, University of Southampton.
    4. Poschke, Markus, 2009. "Employment protection, firm selection, and growth," Journal of Monetary Economics, Elsevier, vol. 56(8), pages 1074-1085, November.
    5. Sangheon Lee & Deirdre McCann & Nina Torm, 2008. "The World Bank's “Employing Workers” index: Findings and critiques – A review of recent evidence," International Labour Review, International Labour Organization, vol. 147(4), pages 416-432, December.
    6. Haltiwanger, John & Scarpetta, Stefano & Schweiger, Helena, 2006. "Assessing job flows across countries : the role of industry, firm size, and regulations," Policy Research Working Paper Series 4070, The World Bank.
    7. Herrera, Ana María & Karaki, Mohamad B., 2015. "The effects of oil price shocks on job reallocation," Journal of Economic Dynamics and Control, Elsevier, vol. 61(C), pages 95-113.
    8. repec:ilo:ilowps:413500 is not listed on IDEAS
    9. repec:chb:bcchec:v:21:y:2018:i:1:p:004-033 is not listed on IDEAS
    10. Almeida, Rita K. & Carneiro, Pedro, 2007. "Inequality and Employment in a Dual Economy: Enforcement of Labor Regulation in Brazil," IZA Discussion Papers 3094, Institute of Labor Economics (IZA).
    11. Marc van Essen & J. (Hans) van Oosterhout & Pursey P. M. A. R. Heugens, 2013. "Competition and Cooperation in Corporate Governance: The Effects of Labor Institutions on Blockholder Effectiveness in 23 European Countries," Organization Science, INFORMS, vol. 24(2), pages 530-551, April.
    12. Alberto Naudon D. & Andrés Pérez M., 2018. "Unemployment dynamics in Chile: 1960-2015," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 21(1), pages 004-033, April.
    13. Galli, Rossana. & Kucera, David,, 2008. "Gender, informality and employment adjustment in Latin America," ILO Working Papers 994135003402676, International Labour Organization.
    14. Michael Landesmann & Sandra M. Leitner, 2015. "Labour Mobility of Migrants and Natives in the European Union: An Empirical Test of the 'Greasing of the Wheels’ Effect of Migrants," wiiw Working Papers 119, The Vienna Institute for International Economic Studies, wiiw.
    15. repec:nms:joeems:jeems-2014-03-prasnikar is not listed on IDEAS
    16. repec:eee:eneeco:v:64:y:2017:i:c:p:469-482 is not listed on IDEAS
    17. Jaime Gatica & Pilar Romaguera, 2005. "El Mercado Laboral en Chile Nuevos Temas y Desafíos," Documentos de Trabajo 210, Centro de Economía Aplicada, Universidad de Chile.

    More about this item

    Keywords

    Employment Protection policies; Job Creation; Job Destruction; Employment flows and Firm entry and Exit.;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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