[Journal:] Zeitschrift für ArbeitsmarktForschung – Journal for Labour Market Research [ISSN:] 2510-5027 [Volume:] 44 [Year:] 2011 [Issue:] 1/2 [Pages:] 173-180
In Germany, there exist around 160 threshold values stating that certain labour laws and regulations apply only in establishments above a critical size (usually defined by the number of employees). As crossing a threshold may result in additional costs for the firm, it is often hypothesized that firms try not to exceed thresholds, in such a way dampening employment growth. Similarly, firms might reduce employment in order to get rid of certain regulations applying above a threshold. In our project, we have tested these hypotheses using different data sets and investigating several labour laws (such as the Disabled Persons Act, the Works Constitution Act, and various regulations creating thresholds around the size of 20 employees in a firm). In contrast to expectations, very few effects on employment dynamics have been found. Since thresholds are defined inconsistently, we have developed several suggestions for simplifying and unifying threshold regulations, which should reduce transaction costs and side effects.