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How does employment protection legislation influence hiring and firing decisions by the smallest firms?

André van Stel (), Jose Maria Millan (), Concepción Román and Ana Millán

No H201216, Scales Research Reports from EIM Business and Policy Research

Abstract: This paper examines the impact of employment protection legislation (EPL) on hiring decisions by own-account workers and firing decisions by very small firms (1-4 employees). Using data from the EU-15 countries, our results show that the strictness of employment protection legislation is negatively related to both these types of decisions, and hence, to labour mobility among the smallest firms. This new evidence may be useful for governments aiming to create a more enabling macro-environment for employment and productivity growth.

Pages: 14 pages
Date: 2013-03-13
New Economics Papers: this item is included in nep-ent, nep-eur and nep-iue
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