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The Effects of Employment Protection: Learning from Variable Enforcement

  • Tito Boeri
  • Juan F. Jimeno

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 to make inferences on the impact of EPL which go beyond the usual cross-country approach. In this paper we develop a simple model which 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-o®. We do not observe this effect in the case of temporary workers.

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Paper provided by FEDEA in its series Working Papers with number 2003-12.

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Handle: RePEc:fda:fdaddt:2003-12
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  5. Andrea Borgarello & Pietro Garibaldi & Lia Pacelli, 2003. "Employment Protection Legislation and the Size of Firms," LABORatorio R. Revelli Working Papers Series 23, LABORatorio R. Revelli, Centre for Employment Studies.
  6. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
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  8. Adriana Kugler & Giovanni Pica, 2003. "Effects of employment protection and product market regulations on the Italian labor market," Economics Working Papers 722, Department of Economics and Business, Universitat Pompeu Fabra.
  9. Gregg, Paul & Manning, Alan, 1997. "Skill-biassed change, unemployment and wage inequality," European Economic Review, Elsevier, vol. 41(6), pages 1173-1200, June.
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  11. Adriana D. Kugler & Gilles Saint Paul, 2000. "Hiring and firing costs, adverse selection and long-term unemployment," Economics Working Papers 447, Department of Economics and Business, Universitat Pompeu Fabra.
  12. Juan J Dolado & Carlos Garcia--Serrano & Juan F. Jimeno, 2002. "Drawing Lessons From The Boom Of Temporary Jobs In Spain," Economic Journal, Royal Economic Society, vol. 112(721), pages F270-F295, June.
  13. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  14. Thomas K. Bauer & Stefan Bender & Holger Bonin, 2007. "Dismissal Protection and Worker Flows in Small Establishments," Economica, London School of Economics and Political Science, vol. 74(296), pages 804-821, November.
  15. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
  16. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier.
  17. Fabiano Schivardi & Roberto Torrini, 2003. "Firm Size Distribution and EPL in Italy," William Davidson Institute Working Papers Series 2003-613, William Davidson Institute at the University of Michigan.
  18. Stephen Nickell & D. Nicolitsas, 1994. "Wages," LSE Research Online Documents on Economics 51644, London School of Economics and Political Science, LSE Library.
  19. Adriana Kugler & Giovanni Pica, 2003. "The Effects of Employment Protection and Product Market Regulations on the Italian Labor Market," LABORatorio R. Revelli Working Papers Series 28, LABORatorio R. Revelli, Centre for Employment Studies.
  20. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
  21. Giuseppe BERTOLA & Tito BOERI & Sandrine CAZES, 2000. "Employment protection in industrialized countries: The case for new indicators," International Labour Review, International Labour Organization, vol. 139(1), pages 57-72, 03.
  22. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
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