When Protection Puts You in Jeopardy — How Removing Small‐Business Clauses Affects Employment Duration

Christine Luecke

LABOUR, 2018, vol. 32, issue 4, 213-236

Abstract: Dismissal protection has undergone many statutory changes in Germany. In a 2004 reform, small firms were exempted from dismissal protection. This paper estimates the effects of dismissal protection on the risk of leaving the establishment, taking advantage of the fact that workers employed before the amendment maintained their previous dismissal protection. Workers become eligible for dismissal protection after 6 months of tenure. These 6 months might work as an entry barrier to consequent employment. Utilizing administrative linked employer–employee data, the results hint at a higher risk during the first 6 months in a job and a lower risk thereafter, if dismissal protection is provided. The estimated survivor curves suggest that even after 5 years the protecting effect of dismissal protection did not compensate the initially adverse effect during the first 6 months of tenure. No evidence is found of a positive link between dismissal protection and matching quality.

Date: 2018
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