Who Pays for It? The Heterogeneous Wage Effects of Employment Protection Legislation
Marco Leonardi () and
No 5335, IZA Discussion Papers from Institute of Labor Economics (IZA)
Theory predicts that the wage effects of government-mandated severance payments depend on workers' and firms' relative bargaining power. This paper estimates the effect of employment protection legislation (EPL) on workers' individual wages in a quasi-experimental setting, exploiting a reform that introduced unjust-dismissal costs in Italy for firms below 15 employees and left firing costs unchanged for bigger firms. Accounting for the endogeneity of the treatment status, we find that high-bargaining power workers (stayers, white collar and workers above 45) are almost left unaffected by the increase in EPL, while low-bargaining power workers (movers, blue collar and young workers) suffer a drop both in the wage level and its growth rate.
Keywords: endogeneity of treatment status; policy evaluation; severance payments; costs of unjust dismissals (search for similar items in EconPapers)
JEL-codes: E24 J3 J65 (search for similar items in EconPapers)
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Published in: Economic Journal, 2013, 123, 1236-1278.
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Journal Article: Who Pays for it? The Heterogeneous Wage Effects of Employment Protection Legislation (2013)
Working Paper: Who pays for it? The Heterogeneous Wage Effects of Employment Protection Legislation (2012)
Working Paper: Who Pays for it? The Heterogeneous Wage Effects of Employment Protection Legislation (2012)
Working Paper: Employment Protection Legislation and Wages (2007)
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