Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/51511
Authors: 
Micco, Alejandro
Pagés, Carmen
Year of Publication: 
2007
Series/Report no.: 
Working paper // Inter-American Development Bank, Research Department 592
Abstract: 
This paper examines the economic effects of employment protection legislation in a sample of developed and developing countries. Implementing a difference-indifferences test lessens the potentially severe endogeneity and omitted variable problems associated with cross-country regressions. This test is based on the hypothesis that employment protection regulations are more binding in sectors of activity exposed to higher volatility in demand or supply shocks. The analysis indicates that more stringent legislation slows down job turnover by a significant amount, and that this effect is more pronounced in sectors that are intrinsically more volatile. The paper also finds that employment and value added decline in the most affected sectors, and employment and output effects are driven by a decline in the net entry of firms. In contrast, average employment per plant is not significantly affected.
Subjects: 
Employment Protection Legislation
Employment Reallocation
Gross Job Flows
Employment
Firm Entry and Exit
JEL: 
J23
J32
J63
Document Type: 
Working Paper

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