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The Impact of Employment Protection on the Industrial Wage Structure

John Heywood (), Mary O'Mahony, William Siebert () and Ana Rincon-Aznar
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Mary O'Mahony: King's College London

No 11788, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper tests whether the job security offered by stricter employment protection legislation (EPL) undermines positive compensating wage differentials that would otherwise be paid. Specifically, we ask whether industries with relatively more need for layoffs and labour flexibility have lower wages in countries where stricter EPL protects workers from layoffs. We find this generally to be true for a large sample of industries in the major OECD countries over 1984-2005, particularly for wages of unskilled workers. However, we also find that where workers are well organised, they can take advantage of EPL to secure higher wages.

Keywords: employment protection legislation; labour regulation; compensating wage differentials; education and inequality; labour organisation; layoffs (search for similar items in EconPapers)
JEL-codes: I24 J31 J41 J50 J63 J83 K31 L51 M50 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2018-08
New Economics Papers: this item is included in nep-lab and nep-law
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