Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/209131
Authors: 
Marzinotto, Benedicta
Wintr, Ladislav
Year of Publication: 
2019
Series/Report no.: 
IWH-CompNet Discussion Papers 5/2019
Abstract: 
This paper finds that employment protection legislation (EPL) had a significant impact on employment adjustment in Europe over 2001-2013, once we account for firm-size related exemptions to EPL. We construct a novel coverage-adjusted EPL indicator and find that EPL hinders employment growth at the firm level and increases the share of firms that remain in the same size class. This suggests that stricter EPL restrains job creation because firms fear the costs of shedding jobs during downturns. We do not find evidence that EPL has positive effects on employment by limiting job losses after adverse shocks. In addition to standard controls for the share of credit-constrained firms and the position in the business cycle, we also control for sizerelated corporate tax exemptions and find that these also significantly constrain job creation among incumbent firms.
Subjects: 
employment protection
firm growth
job reallocation
JEL: 
D22
J08
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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