The Perverse Effects of Partial Employment Protection Reform: Experience Rating and French Older Workers

Luc Behaghel, Bruno Crépon and Béatrice Sédillot ()
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Béatrice Sédillot: CREST-INSEE

No 1679, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: French firms laying off workers aged 50 and above have to pay a tax to the unemployment insurance system, known as the Delalande tax. This is an original case of experience rating in the European context, restricted to older workers, whose employment prospects are particularly bad. We evaluate its impact on layoff (firing) as well as on hiring, taking advantage of several changes in the measure since its introduction in 1987. We find particularly strong evidence of an adverse effect of the tax on the firms' propensity to hire older workers, thanks to a legislative change in 1992, when workers hired after the age of 50 stopped being liable for the tax. Chances to find a job increased significantly for unemployed workers older than 50, compared to workers just below 50 who remained liable for the tax. We estimate that before 1992, the tax reduced the probability that an unemployed worker aged 50 find a job by as much as 25%. Evidence on the effect on layoffs is less clear cut. The impact is sizeable only for the most stringent tax schedule, after 1998, but it is also imprecisely estimated.

Keywords: experience rating; employment protection; older workers; firing; hiring (search for similar items in EconPapers)
JEL-codes: J23 J63 J65 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2005-07
New Economics Papers: this item is included in nep-lab and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published - published in: Journal of Public Economics, 2008, 92 (3-4), 696-721.

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Related works:
Journal Article: The perverse effects of partial employment protection reform: The case of French older workers (2008)
Working Paper: The perverse effects of partial employment protection reform: experience rating and french old workers (2006)
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