Labor market rigidities and misallocation: Evidence from a natural experiment

Dinara Alpysbayeva and Stijn Vanormelingen

Labour Economics, 2022, vol. 78, issue C

Abstract: This paper estimates the impact of labor market rigidities on labor misallocation. To this end, we use a recent policy change in Belgium, leading to an increase in employment protection for blue-collar workers and a decrease in employment protection for white-collar workers. The wedge between marginal product and marginal cost - the gap - is used as a measure for misallocation. Using a rich data set of the universe of Belgian firms, evidence shows that a firm with 90% blue-collar workers experienced after the policy change an increase in the gap of 3300 euro relative to a firm with 10% of blue-collar workers.

Keywords: Misallocation; Productivity; Distortions; Labor market (search for similar items in EconPapers)
JEL-codes: D24 J41 J65 O47 O52 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:78:y:2022:i:c:s0927537122001191

DOI: 10.1016/j.labeco.2022.102229

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