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The Effect of Employment Protection on Worker Effort: A Comparison of Absenteeism During and After Probation

  • Ichino, Andrea

    ()

    (European University Institute)

  • Riphahn, Regina T.

    ()

    (University of Erlangen-Nuremberg)

Employment protection systems are known to generate significant distortions in firms’ hiring and firing decisions. We know much less about the impact of these regulations on worker effort. The goal of this paper is to fill in this gap and in particular to assess whether the provision of employment protection induces less effort among workers in the form of absenteeism. Our analysis is based on weekly observations for the 858 white collar workers hired by a large Italian bank between January 1993 and February 1995. These workers begin to be protected against firing only after the twelfth week of tenure and we observe them for one year. We show that the number of days of absence per week more than doubles once employment protection is granted, thus confirming what is suggested by our theoretical model and what is typically assumed in the literature. We also discuss how this evidence can be used to estimate what the absenteeism rate would be in Italy if employment protection were eliminated.

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File URL: http://ftp.iza.org/dp385.pdf
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 385.

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Length: 22 pages
Date of creation: Oct 2001
Date of revision:
Publication status: published in: Journal of the European Economic Association, 2005, 3 (1), 120-143
Handle: RePEc:iza:izadps:dp385
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  1. Adriana Kugler, 1999. "The Impact of Firing Costs on Turnover and Unemployment: Evidence from the Colombian Labour Market Reform," International Tax and Public Finance, Springer, vol. 6(3), pages 389-410, August.
  2. Ichino, Andrea & Maggi, Giovanni, 2000. "Work Environment And Individual Background: Explaining Regional Shirking Differentials In A Large Italian Firm," CEPR Discussion Papers 2387, C.E.P.R. Discussion Papers.
  3. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
  4. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October.
  5. 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.
  6. Riphahn, Regina T. & Thalmaier, Anja, 1999. "Behavioral Effects of Probation Periods: An Analysis of Worker Absenteeism," IZA Discussion Papers 67, Institute for the Study of Labor (IZA).
  7. Garibaldi, Pietro, 1998. "Job flow dynamics and firing restrictions," European Economic Review, Elsevier, vol. 42(2), pages 245-275, February.
  8. Barmby, Tim & Stephan, Gesine, 2000. "Worker Absenteeism: Why Firm Size May Matter," Manchester School, University of Manchester, vol. 68(5), pages 568-77, September.
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