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Employment Protection Legislation and Job Reallocation across Sectors, Firms and Workers: A Survey

Author

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  • Pierre Cahuc

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics, CEPR - Center for Economic Policy Research)

  • Marco G Palladino

    (Banque de France)

Abstract

This paper provides a review of the existing literature on the effects of employment protection legislation (EPL) on job allocation across industries, firms, and workers, and its implications for innovation and economic growth. We analyze empirical studies to assess how EPL influences resource allocation, firm dynamics, and labor market segmentation. The review highlights the heterogeneous effects of EPL on different firms and workers' groups. Additionally, we discuss the channels identified in the structural literature through which EPL-induced job reallocation affects productivity, innovation, and overall growth. While existing evidence demonstrates the significant influence of EPL on all these outcomes, further quantification of these effects remains a research challenge.

Suggested Citation

  • Pierre Cahuc & Marco G Palladino, 2024. "Employment Protection Legislation and Job Reallocation across Sectors, Firms and Workers: A Survey," Post-Print hal-05446770, HAL.
    • Handle: RePEc:hal:journl:hal-05446770
    DOI: 10.4337/9781839106958
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-05446770v1
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    References listed on IDEAS

    as
    1. Hijzen, Alexander & Mondauto, Leopoldo & Scarpetta, Stefano, 2017. "The impact of employment protection on temporary employment: Evidence from a regression discontinuity design," Labour Economics, Elsevier, vol. 46(C), pages 64-76.
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    3. Tito Boeri & Pietro Garibaldi, 2007. "Two Tier Reforms of Employment Protection: a Honeymoon Effect?," Economic Journal, Royal Economic Society, vol. 117(521), pages 357-385, June.
    4. Bils, Mark & Klenow, Peter J. & Ruane, Cian, 2021. "Misallocation or Mismeasurement?," Journal of Monetary Economics, Elsevier, vol. 124(S), pages 39-56.
    5. Bassanini, Andrea & Garnero, Andrea, 2013. "Dismissal protection and worker flows in OECD countries: Evidence from cross-country/cross-industry data," Labour Economics, Elsevier, vol. 21(C), pages 25-41.
    6. Klaas Mulier & Mike Mariathasan & Ozan Guler & Andrea Caggese, 2022. "Firing Costs and Productivity: Evidence from a Natural Experiment," Working Papers 1376, Barcelona School of Economics.
    7. Haltiwanger, John & Scarpetta, Stefano & Schweiger, Helena, 2014. "Cross country differences in job reallocation: The role of industry, firm size and regulations," Labour Economics, Elsevier, vol. 26(C), pages 11-25.
    8. Garcia-Louzao, Jose, 2022. "Workers’ job mobility in response to severance pay generosity," Labour Economics, Elsevier, vol. 75(C).
    9. Samaniego, Roberto M., 2006. "Do Firing Costs Affect The Incidence Of Firm Bankruptcy?," Macroeconomic Dynamics, Cambridge University Press, vol. 10(4), pages 467-501, September.
    10. Toshihiko Mukoyama & Sophie Osotimehin, 2019. "Barriers to Reallocation and Economic Growth: The Effects of Firing Costs," American Economic Journal: Macroeconomics, American Economic Association, vol. 11(4), pages 235-270, October.
    11. Diego Restuccia & Richard Rogerson, 2008. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 707-720, October.
    12. Federico Cingano & Marco Leonardi & Julián Messina & Giovanni Pica, 2016. "Employment Protection Legislation, Capital Investment and Access to Credit: Evidence from Italy," Economic Journal, Royal Economic Society, vol. 126(595), pages 1798-1822, September.
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    Cited by:

    1. Adachi, Daisuke & Kambayashi, Ryo & Kawaguchi, Kohei, 2025. "Employers' Unilateral Settlement of Dismissal Disputes," SocArXiv 89xgj_v1, Center for Open Science.
    2. Angelone, Paolo & Canale, Rosaria Rita, 2025. "Italian labour productivity: a wage-led decline," Structural Change and Economic Dynamics, Elsevier, vol. 74(C), pages 493-503.
    3. Avanindra Nath Thakur & Priyanshi Chaudhary, 2025. "Employment Conditions, Structural Change, and Industrial Policy in Neoliberal India: An Enterprise-level Analysis of Employment Status, 2004–2024," Agrarian South: Journal of Political Economy, Centre for Agrarian Research and Education for South, vol. 14(2), pages 257-290, June.
    4. Cahuc, Pierre, 2024. "The micro and macro economics of short-time work," Handbook of Labor Economics,, Elsevier.

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    Keywords

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    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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