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Effects of Dismissal Protection Legislation on Individual Employment Stability in Germany

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Abstract

Changes in Dismissal Protection Legislation in Germany have been a subject to ongoing research in the past decade. The majority of these studies, however, has not been able to determine significant effects on job and worker flows in firms affected by the reforms. We estimate the impact of dismissal protection on individual employment stability using the 1999 reform as a "natural experiment".We provide insights into the effects of legislation on the firms’ matching behaviour. Our results hint at increased job security after the reform for those spells affected by it. This rise in stability was, however, accompanied by modest instability at start suggesting that firms facing additional firing costs tend to cease probation to shed unproductive job-worker matches. The latter effect, however, was not found to be significant.

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  • Bernhard Boockmann & Daniel Gutknecht & Susanne Steffes, 2008. "Effects of Dismissal Protection Legislation on Individual Employment Stability in Germany," IAW Discussion Papers 45, Institut für Angewandte Wirtschaftsforschung (IAW).
    • Handle: RePEc:iaw:iawdip:45
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    Cited by:

    1. Per Skedinger, 2010. "Employment Protection Legislation," Books, Edward Elgar Publishing, number 13686.

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    JEL classification:

    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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