Different paths towards Flexibility, Deregulated employment protection or temporary employment?

Heejung Chung

MPRA Paper from University Library of Munich, Germany

Abstract: There are numerous debates on the need to increase flexibility through deregulation of employment protection. Many believe it is essential in generating employment but it is also believed to generate �socially unacceptable� flexible jobs. However, recent studies point to strict regulations on firing permanent workers as the cause of increase in the shares of temporary employment. In other words, stringent protective regulations are not only a source of rigidity, but also force employers to increase flexibility in the labour market through other means. This study explores this hypothesis by examining various aspects of employment protection legislation in concomitance with other competing factors, including structural changes and labour market institutional factors, to explain the cross-national variance of temporary employment across 19 OECD countries using quantitative data. The results show that high cost of firing workers on permanent contracts is the most important factor that explains the high shares of temporary employment. This implies that there are two different ways in which flexibility has been introduced. Either introducing flexibility throughout the labour market using relaxed regulations on firing regular workers, or securing the core workers with high firing cost for regular workers while allowing for flexibility through the use of temporary employment.

Keywords: labour market flexibility; temporary employment; EPL (employment protection legislation); OECD countries; cross-national comparative studies; employment regimes (search for similar items in EconPapers)
JEL-codes: J00 J08 P5 (search for similar items in EconPapers)
Date: 2005-08, Revised 2005-10
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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