Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/196803 
Year of Publication: 
2019
Series/Report no.: 
IZA Discussion Papers No. 12305
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
To estimate the causal effect of employment protection on firms' worker selection, we study a policy change that reduced dismissal costs for the employers of over a tenth of Sweden's workforce. Our difference-in-differences analysis of firms' hiring uses individual ability measures including estimated worker fixed effects and cognitive test scores. We find that the reform reduced minimum hire quality by 5% of a standard deviation, half of which we can attribute to firms' hiring becoming more selective. Our results help discriminate between existing theories, supporting the prediction that firms shift their hiring standards in response to changes in dismissal costs.
Subjects: 
worker selection
screening
hiring standard
employment protection
dismissal costs
JEL: 
M51
D22
J24
J38
Document Type: 
Working Paper

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