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Relaxed Dismissal Protection: Effects on the Hiring and Firing Behaviour of Small Firms

Author

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  • Stefan Bauernschuster

    () (University of Jena, Graduate College "The Economics of Innovative Change")

Abstract

Small firms are seen as important drivers of dynamics and innovation. They need to be particularly flexible and be able to react quickly to new challenges. This paper uses the latest change in dismissal protection legislation in Germany as a natural experiment and tries to find causal effects on the hiring and firing behaviour of small firms. Using a difference-in-differences approach, I find only small but positive effects on the total number of hirings. However, there are substantial substitution effects from temporary contract hirings to permanent contract hirings. The results remain robust when using count data models and applying fixed effects specifications.

Suggested Citation

  • Stefan Bauernschuster, 2009. "Relaxed Dismissal Protection: Effects on the Hiring and Firing Behaviour of Small Firms," Jena Economic Research Papers 2009-015, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2009-015
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    File URL: http://zs.thulb.uni-jena.de/receive/jportal_jparticle_00144198
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    Cited by:

    1. Anders Bornhäll & Sven-Olov Daunfeldt & Niklas Rudholm, 2017. "Employment protection legislation and firm growth: evidence from a natural experiment," Industrial and Corporate Change, Oxford University Press, vol. 26(1), pages 169-185.
    2. Per Skedinger, 2010. "Employment Protection Legislation," Books, Edward Elgar Publishing, number 13686.

    More about this item

    Keywords

    Employment Protection; Small Business; Worker Flows;

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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