Employment Protection Legislation and Its Impact on the Elasticity of Employment in OECD Countries

Eugeniusz Kwiatkowski and Przemysław Włodarczyk

Gospodarka Narodowa. The Polish Journal of Economics, 2017, issue 3, 29-53

Abstract: This article explores the impact of employment protection legislation on the elasticity of employment with respect to GDP. We present the essence and scope of changes in employment protection and specify the theoretical mechanisms of its impact on the labor market. We also measure this impact using data for 23 OECD countries in the 2002-2014 period. In the short term, we should expect the existence of a non-linear (U-shaped) relationship between the level of employment protection legislation (EPL) and the elasticity of employment. In the long term, however, EPL is perceived as neutral for the level of employment as flexible wages enable employers to accommodate changes in the labor market situation. The hypothesis of the long-term neutrality of EPL for labor market categories was confirmed with the use of panel cointegration tests. The hypothesis concerning the impact of EPL on short-term labor market adjustments was confirmed only for the global crisis period.

Keywords: prawna ochrona zatrudnienia; elastyczność zatrudnienia; U-kształtna zależność; panelowy model korekty błędem (search for similar items in EconPapers)
JEL-codes: J23 (search for similar items in EconPapers)
Date: 2017
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:sgh:gosnar:y:2017:i:3:p:29-53

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