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Employment protection and entrepreneurship: Unpacking the effects of employment protection legislation on the allocation of entrepreneurial activity in society

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  • W.J. Liebregts
  • F.C. Stam

Abstract

Labor market institutions enable and constrain particular behaviors on the labor market and beyond. We take a closer look on employment protection legislation (EPL), and its unintended effects on entrepreneurial activity. We unpack the effects of EPL by disentangling the two mechanisms of the severance pay and notice period, and analyze the effects of these mechanisms on the allocation of entrepreneurial activity across employment and self-employment. This study uses multilevel analyses to examine the separate effect of the two main elements of EPL on an individual’s occupational status. In general, the severance pay is found to be negatively related to entrepreneurial employees, whereas the notice period shows a positive relationship. The opposite is true for the effects on self-employed individuals.

Suggested Citation

  • W.J. Liebregts & F.C. Stam, 2016. "Employment protection and entrepreneurship: Unpacking the effects of employment protection legislation on the allocation of entrepreneurial activity in society," Working Papers 16-08, Utrecht School of Economics.
    • Handle: RePEc:use:tkiwps:1608
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    References listed on IDEAS

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    Cited by:

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    2. Claire Economidou & Luca Grilli & Magnus Henrekson & Mark Sanders, 2018. "Financial and Institutional Reforms for an Entrepreneurial Society," Small Business Economics, Springer, vol. 51(2), pages 279-291, August.

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    Keywords

    labor market institutions; employment protection legislation; severance pay; notice period; entrepreneurial employee activity; self-employment;
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