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Firm dynamics and employment protection: Evidence from sectoral data

Anna Bottasso (), Maurizio Conti () and Giovanni Sulis ()

Labour Economics, 2017, vol. 48, issue C, 35-53

Abstract: We analyze the impact of employment protection legislation (EPL) on firms’ entry and exit rates in a set of industries in thirteen OECD countries from the most recent version of the OECD Structural and Business Statistics Database. Using a difference-in-differences identification strategy, we find that more stringent EPL is associated to both lower entry and exit in industries characterized by higher worker reallocation intensity. We decompose the overall effect of EPL and find that both collective and individual dismissal regulations reduce the entry and exit rates. The negative effects of EPL are stronger for small firms. An extensive robustness analysis confirms our main findings.

Keywords: Entry and exit; Turnover; Employment protection legislation; Misallocation; Diff-in-diff. (search for similar items in EconPapers)
JEL-codes: J65 L11 L26 (search for similar items in EconPapers)
Date: 2017
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Working Paper: Firm Dynamics and Employment Protection: Evidence from Sectoral Data (2016) Downloads
Working Paper: Firm Dynamics and Employment Protection: Evidence from Sectoral Data (2016) Downloads
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DOI: 10.1016/j.labeco.2017.05.013

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