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The Perverse Effects of Partial Employment Protection Reform: Experience Rating and French Older Workers

  • Behaghel, Luc


    (Paris School of Economics)

  • Crépon, Bruno



  • Sédillot, Béatrice



French firms laying off workers aged 50 and above have to pay a tax to the unemployment insurance system, known as the Delalande tax. This is an original case of experience rating in the European context, restricted to older workers, whose employment prospects are particularly bad. We evaluate its impact on layoff (firing) as well as on hiring, taking advantage of several changes in the measure since its introduction in 1987. We find particularly strong evidence of an adverse effect of the tax on the firms' propensity to hire older workers, thanks to a legislative change in 1992, when workers hired after the age of 50 stopped being liable for the tax. Chances to find a job increased significantly for unemployed workers older than 50, compared to workers just below 50 who remained liable for the tax. We estimate that before 1992, the tax reduced the probability that an unemployed worker aged 50 find a job by as much as 25%. Evidence on the effect on layoffs is less clear cut. The impact is sizeable only for the most stringent tax schedule, after 1998, but it is also imprecisely estimated.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1679.

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Length: 37 pages
Date of creation: Jul 2005
Date of revision:
Publication status: published in: Journal of Public Economics, 2008, 92 (3-4), 696-721.
Handle: RePEc:iza:izadps:dp1679
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  1. Anderson, Patricia M. & Meyer, Bruce D., 2000. "The effects of the unemployment insurance payroll tax on wages, employment, claims and denials," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 81-106, October.
  2. David H. Autor & John J. Donohue & Stewart J. Schwab, 2006. "The Costs of Wrongful-Discharge Laws," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 211-231, May.
  3. Patrick Aubert, 2003. "Les quinquagénaires dans l'emploi salarié privé," Économie et Statistique, Programme National Persée, vol. 368(1), pages 65-94.
  4. Luc Behaghel & Jérôme Gautié, 2008. "From internal to transitional labour markets? Firms restructuring and early retirement in France," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00266365, HAL.
  5. repec:oup:qjecon:v:112:y:1997:i:3:p:913-37 is not listed on IDEAS
  6. Luc Behaghel & Bruno Crépon & Béatrice Sédillot, 2004. "Contribution Delalande et transitions sur le marché du travail," Économie et Statistique, Programme National Persée, vol. 372(1), pages 61-88.
  7. Daron Acemoglu & Joshua Angrist, 1998. "Consequences of Employment Protection? The Case of the Americans with Disabilities Act," NBER Working Papers 6670, National Bureau of Economic Research, Inc.
  8. Hakola, Tuulia & Uusitalo, Roope, 2005. "Not so voluntary retirement decisions? Evidence from a pension reform," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2121-2136, December.
  9. John M. Abowd & Francis Kramarz, 1997. "The Costs of Hiring and Separations," NBER Working Papers 6110, National Bureau of Economic Research, Inc.
  10. Mitchel Y. Abolafia (ed.), 2005. "Markets," Books, Edward Elgar, number 2788.
  11. Topel, Robert H, 1984. "Experience Rating of Unemployment Insurance and the Incidence of Unemployment," Journal of Law and Economics, University of Chicago Press, vol. 27(1), pages 61-90, April.
  12. Topel, Robert H, 1983. "On Layoffs and Unemployment Insurance," American Economic Review, American Economic Association, vol. 73(4), pages 541-59, September.
  13. E. Paul Durrenberger, 2005. "Labour," Chapters, in: A Handbook of Economic Anthropology, chapter 8 Edward Elgar.
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