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Firm Dynamics and Employment Protection: Evidence from Sectoral Data

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  • Bottasso, Anna

    () (University of Genova)

  • Conti, Maurizio

    () (University of Genova)

  • Sulis, Giovanni

    () (University of Cagliari)

Abstract

In this paper we analyse the impact of employment protection legislation (EPL) on firms' entry and exit rates for a large sample of industries of thirteen countries selected from the most recent version of the OECD Structural and Business Statistics Database. Using a differences-in-differences identification strategy, we find that more stringent EPL is associated to lower entry and exit rates, particularly in industries characterized by higher job reallocation intensity. We also find that both collective and individual dismissal regulations reduce firms' entry and exit rates. Interestingly, our results suggest that the negative effects of EPL is stronger in the case of firms between one and nine employees while, in the case of larger ones, results are not clear-cut. An extensive sensitivity analysis confirm the robustness of our findings.

Suggested Citation

  • Bottasso, Anna & Conti, Maurizio & Sulis, Giovanni, 2016. "Firm Dynamics and Employment Protection: Evidence from Sectoral Data," IZA Discussion Papers 9740, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp9740
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    Cited by:

    1. Christian Osterhold & Ana Fontoura Gouveia, 2018. "Fear the walking dead: zombie firms, spillovers and exit barriers," Working Papers w201811, Banco de Portugal, Economics and Research Department.
    2. Giuseppina Gianfreda & Giovanna Vallanti, 2017. "Informality and productivity: do firms escape EPL through shadow employment? Evidence from a regression discontinuity design," Working Papers 2017-01, Universita' di Cassino, Dipartimento di Economia e Giurisprudenza.
    3. Bratti, Massimiliano & Conti, Maurizio & Sulis, Giovanni, 2018. "Employment Protection, Temporary Contracts and Firm-Provided Training: Evidence from Italy," IZA Discussion Papers 11339, Institute for the Study of Labor (IZA).
    4. Giuseppina Gianfreda & Giovanna Vallanti, 2017. "Informality and productivity: do firms escape EPL through shadow employment? Evidence from a regression discontinuity design," Working Papers 2017-01, Universita' di Cassino, Dipartimento di Economia e Giurisprudenza.
    5. Andrea Bassanini & Federico Cingano, 2019. "Before It Gets Better: The Short-Term Employment Costs of Regulatory Reforms," ILR Review, Cornell University, ILR School, vol. 72(1), pages 127-157, January.

    More about this item

    Keywords

    entry and exit; turnover; employment protection legislation; reallocation;

    JEL classification:

    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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