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| Title: | | Who pays for it? The heterogeneous wage effects of employment protection legislation  |
| 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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