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Title:Who pays for it? The heterogeneous wage effects of employment protection legislation PDF Logo
Authors:Leonardi, Marco
Pica, Giovanni
Issue Date:2010
Series/Report no.:Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 5335
Abstract:Theory predicts that the wage effects of government-mandated severance payments depend on workers' and firms' relative bargaining power. This paper estimates the effect of employment protection legislation (EPL) on workers' individual wages in a quasi-experimental setting, exploiting a reform that introduced unjust-dismissal costs in Italy for firms below 15 employees and left firing costs unchanged for bigger firms. Accounting for the endogeneity of the treatment status, we find that high-bargaining power workers (stayers, white collar and workers above 45) are almost left unaffected by the increase in EPL, while low-bargaining power workers (movers, blue collar and young workers) suffer a drop both in the wage level and its growth rate.
Subjects:costs of unjust dismissals
severance payments
policy evaluation
endogeneity of treatment status
JEL:E24
J3
J65
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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