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The Impact of Employment Protection Mandates on Demographic Temporary Employment Patterns: International Microeconomic Evidence

  • Kahn, Lawrence M.


    (Cornell University)

Using 1994-98 International Adult Literacy Survey (IALS) microdata, this paper investigates the impact of employment protection laws on the incidence of temporary employment by demographic group. More stringent employment protection for regular jobs is predicted to increase the relative incidence of temporary employment for less experienced and less skilled workers. I test this reasoning using IALS data for Canada, Finland, Italy, the Netherlands, Switzerland, the United Kingdom and the United States, countries with widely differing levels of mandated employment protection. Across these countries, the strength of such mandates (as measured by the OECD) is positively associated with the relative incidence of temporary employment for young workers, native women, immigrant women and those with low cognitive ability. These effects largely hold up when I adjust for the possible sample selection due to the fact that employment to population ratios differ across countries. Moreover, the effects of protection on the young, women, and immigrants are stronger in countries with higher levels of collective bargaining coverage, suggesting a connection between binding wage floors and the allocative effects of employment protection mandates.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1548.

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Length: 43 pages
Date of creation: Mar 2005
Date of revision:
Publication status: published in: Economic Journal, 2007, 117(521), F333-F356
Handle: RePEc:iza:izadps:dp1548
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References listed on IDEAS
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  1. Bertola, Giuseppe, 1992. "Labor Turnover Costs and Average Labor Demand," Journal of Labor Economics, University of Chicago Press, vol. 10(4), pages 389-411, October.
  2. Jennifer Hunt, 2002. "The Transition in East Germany: When Is a Ten-Point Fall in the Gender Wage Gap Bad News?," Journal of Labor Economics, University of Chicago Press, vol. 20(1), pages 148-169, January.
  3. Alison L Booth & Juan J. Dolado & Jeff Frank, 2002. "Symposium On Temporary Work Introduction," Economic Journal, Royal Economic Society, vol. 112(480), pages F181-F188, June.
  4. Francine D. Blau & Lawrence M. Kahn, 2005. "Do Cognitive Test Scores Explain Higher U.S. Wage Inequality?," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 184-193, February.
  5. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  6. Alison L. Booth & Marco Francesconi & Jeff Frank, 2002. "Temporary Jobs: Stepping Stones or Dead Ends?," LABORatorio R. Revelli Working Papers Series 8, LABORatorio R. Revelli, Centre for Employment Studies.
  7. Richard Layard & Stephen Nickell, 1998. "Labour Market Institutions and Economic Performance," CEP Discussion Papers dp0407, Centre for Economic Performance, LSE.
  8. Dolado, Juan J. & Garcia-Serrano, Carlos & Jimeno, Juan F, 2001. "Drawing Lessons From the Boom of Temporary Jobs in Spain," CEPR Discussion Papers 2884, C.E.P.R. Discussion Papers.
  9. Maia Guell, 2000. "Fixed-term contracts and unemployment: an efficiency wage analysis," LSE Research Online Documents on Economics 20181, London School of Economics and Political Science, LSE Library.
  10. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  11. Francine D. Blau & Lawrence M. Kahn, 1994. "International Differences in Male Wage Inequality: Institutions versus Market Forces," NBER Working Papers 4678, National Bureau of Economic Research, Inc.
  12. Giuseppe Bertola & Francine Blau & Lawrence Kahn, 2007. "Labor market institutions and demographic employment patterns," Journal of Population Economics, Springer, vol. 20(4), pages 833-867, October.
  13. Cahuc, Pierre & Postel-Vinay, Fabien, 2001. "Temporary Jobs, Employment Protection and Labor Market Performance," IZA Discussion Papers 260, Institute for the Study of Labor (IZA).
  14. O Blanchard & A Landier, 2002. "The Perverse Effects of Partial Labour Market Reform: fixed--Term Contracts in France," Economic Journal, Royal Economic Society, vol. 112(480), pages F214-F244, June.
  15. Bertil Holmlund & Donald Storrie, 2002. "Temporary Work in Turbulent Times: The Swedish Experience," CESifo Working Paper Series 671, CESifo Group Munich.
  16. repec:oup:qjecon:v:105:y:1990:i:3:p:699-726 is not listed on IDEAS
  17. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
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