IDEAS home Printed from https://ideas.repec.org/p/use/tkiwps/1608.html
   My bibliography  Save this paper

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://dspace.library.uu.nl/bitstream/handle/1874/340530/Liebregts_Stam_2016_.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bruno Amable & Lilas Demmou & Donatella Gatti, 2011. "The effect of employment protection and product market regulation on labour market performance: substitution or complementarity?," Applied Economics, Taylor & Francis Journals, vol. 43(4), pages 449-464.
    2. Lawrence M. Kahn, 2007. "The Impact of Employment Protection Mandates on Demographic Temporary Employment Patterns: International Microeconomic Evidence," Economic Journal, Royal Economic Society, vol. 117(521), pages 333-356, June.
    3. Bruce Fallick & Charles A. Fleischman & James B. Rebitzer, 2006. "Job-Hopping in Silicon Valley: Some Evidence Concerning the Microfoundations of a High-Technology Cluster," The Review of Economics and Statistics, MIT Press, vol. 88(3), pages 472-481, August.
    4. Erik Stam, 2013. "Knowledge and entrepreneurial employees: a country-level analysis," Small Business Economics, Springer, vol. 41(4), pages 887-898, December.
    5. Holmlund, Bertil, 2014. "What do labor market institutions do?," Labour Economics, Elsevier, vol. 30(C), pages 62-69.
    6. Giuseppe BERTOLA & Tito BOERI & Sandrine CAZES, 2000. "Employment protection in industrialized countries: The case for new indicators," International Labour Review, International Labour Organization, vol. 139(1), pages 57-72, March.
    7. Cahuc, Pierre & Postel-Vinay, Fabien, 2002. "Temporary jobs, employment protection and labor market performance," Labour Economics, Elsevier, vol. 9(1), pages 63-91, February.
    8. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    9. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 503-530.
    10. Edward P. Lazear, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(3), pages 699-726.
    11. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-748, August.
    12. Torrini, Roberto, 2005. "Cross-country differences in self-employment rates: the role of institutions," Labour Economics, Elsevier, vol. 12(5), pages 661-683, October.
    13. Acemoglu, Daron, 1995. "Reward structures and the allocation of talent," European Economic Review, Elsevier, vol. 39(1), pages 17-33, January.
    14. Concepción Román & Emilio Congregado & José Millán, 2011. "Dependent self-employment as a way to evade employment protection legislation," Small Business Economics, Springer, vol. 37(3), pages 363-392, October.
    15. Baumol, William J., 1996. "Entrepreneurship: Productive, unproductive, and destructive," Journal of Business Venturing, Elsevier, vol. 11(1), pages 3-22, January.
    16. John T. Addison & Paulino Teixeira, 2003. "The Economics of Employment Protection," Journal of Labor Research, Transaction Publishers, vol. 24(1), pages 85-129, January.
    17. Millán, Ana & Millán, José María & Román, Concepción & van Stel, André, 2013. "How does employment protection legislation influence hiring and firing decisions by the smallest firms?," Economics Letters, Elsevier, vol. 121(3), pages 444-448.
    18. Kahn, Lawrence M., 2010. "Employment protection reforms, employment and the incidence of temporary jobs in Europe: 1996-2001," Labour Economics, Elsevier, vol. 17(1), pages 1-15, January.
    19. Oecd, 2009. "Employment and Social Protection," OECD Journal on Development, OECD Publishing, vol. 9(4), pages 7-54.
    20. Danielle Venn, 2009. "Legislation, Collective Bargaining and Enforcement: Updating the OECD Employment Protection Indicators," OECD Social, Employment and Migration Working Papers 89, OECD Publishing.
    21. Christopher J. S. Gentle, 1996. "Europe in 2010," Palgrave Macmillan Books, in: After Liberalisation, chapter 7, pages 121-132, Palgrave Macmillan.
    22. Pissarides, Christopher A., 2001. "Employment protection," Labour Economics, Elsevier, vol. 8(2), pages 131-159, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Magdalena M. Ulceluse & Martin Kahanec, 2017. "Does employment protection legislation promote immigrant self-employment?," Discussion Papers 46, Central European Labour Studies Institute (CELSI).
    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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hipp, Lena & Anderson, Christopher J., 2015. "Laziness or liberation? Labor market policies and workers' attitudes toward employment flexibility," LSE Research Online Documents on Economics 101872, London School of Economics and Political Science, LSE Library.
    2. Román, Concepción & Congregado, Emilio & Millán, José María, 2013. "Start-up incentives: Entrepreneurship policy or active labour market programme?," Journal of Business Venturing, Elsevier, vol. 28(1), pages 151-175.
    3. Paulo Mota & José Varejão & Paulo Vasconcelos, 2015. "A hysteresis model-based indicator for employment adjustment rigidity," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(3), pages 547-569, August.
    4. Boeri, Tito & Garibaldi, Pietro & Moen, Espen R., 2017. "Inside severance pay," Journal of Public Economics, Elsevier, vol. 145(C), pages 211-225.
    5. Elert, Niklas & Stenkula, Mikael, 2020. "Intrapreneurship: Productive, Unproductive, and Destructive," Working Paper Series 1367, Research Institute of Industrial Economics.
    6. Berton, Fabio & Migheli Matteo, 2015. "Estimating the marginal rate of substitution between wage and employment protection," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201529, University of Turin.
    7. Ant Bozkaya & William R. Kerr, 2014. "Labor Regulations and European Venture Capital," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(4), pages 776-810, December.
    8. Magnus Henrekson & Dan Johansson & Mikael Stenkula, 2010. "Taxation, Labor Market Policy and High-Impact Entrepreneurship," Journal of Industry, Competition and Trade, Springer, vol. 10(3), pages 275-296, September.
    9. Emiliano Brancaccio & Fabiana De Cristofaro & Raffaele Giammetti, 2020. "No Consensus In The Imf-Oecd 'Consensus': A Meta-Analysis On The Employment Impact Of Labour Deregulations," Working Papers 445, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    10. Elke Jahn & Enzo Weber, 2016. "The effect of temporary help jobs on employment volatility," Canadian Journal of Economics, Canadian Economics Association, vol. 49(1), pages 412-427, February.
    11. Per Skedinger, 2010. "Employment Protection Legislation," Books, Edward Elgar Publishing, number 13686.
    12. Dräger, Vanessa & Marx, Paul, 2012. "Do Firms Demand Temporary Workers When They Face Workload Fluctuation? Cross-Country Firm-Level Evidence on the Conditioning Effect of Employment Protection," IZA Discussion Papers 6894, Institute of Labor Economics (IZA).
    13. John Martin & Stefano Scarpetta, 2012. "Setting It Right: Employment Protection, Labour Reallocation and Productivity," De Economist, Springer, vol. 160(2), pages 89-116, June.
    14. Tatiana Karabchuk, 2016. "The subjective well-being of women in Europe: children, work and employment protection legislation," Mind & Society: Cognitive Studies in Economics and Social Sciences, Springer;Fondazione Rosselli, vol. 15(2), pages 219-245, November.
    15. Magdalena M. Ulceluse & Martin Kahanec, 2017. "Does employment protection legislation promote immigrant self-employment?," Discussion Papers 46, Central European Labour Studies Institute (CELSI).
    16. L'Haridon, Olivier & Malherbet, Franck, 2009. "Employment protection reform in search economies," European Economic Review, Elsevier, vol. 53(3), pages 255-273, April.
    17. Marta Silva & Luis Filipe Martins & Helena Lopes, 2015. "Asymmetric labour market reforms and wage growth with fixed-term contracts: does learning about match quality matter?," Working Papers Series 2 15-04, ISCTE-IUL, Business Research Unit (BRU-IUL).
    18. Dragos Adascalitei & Sameer Khatiwada & Miguel Á. Malo & Pignatti Moran, 2015. "Employment protection and collective bargaining during the great recession: a comprehensive review of international evidence," Revista de Economía Laboral - Spanish Journal of Labour Economics, Asociación Española de Economía Laboral - AEET, vol. 12, pages 50-87.
    19. Milo Bianchi, 2010. "Credit constraints, entrepreneurial talent, and economic development," Small Business Economics, Springer, vol. 34(1), pages 93-104, January.
    20. Salvatori, Andrea, 2010. "Labour contract regulations and workers' wellbeing: International longitudinal evidence," Labour Economics, Elsevier, vol. 17(4), pages 667-678, August.

    More about this item

    Keywords

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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:use:tkiwps:1608. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Marina Muilwijk (email available below). General contact details of provider: https://edirc.repec.org/data/eiruunl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.