Dismissal Protection and Worker Flows in OECD Countries: Evidence from Cross-Country/Cross-Industry Data

Andrea Bassanini and Andrea Garnero

No 6535, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Exploiting a unique dataset including cross-country comparable hiring and separation rates by type of transition for 24 OECD countries, 23 business-sector industries and 13 years, we study the effect of dismissal regulations on different types of gross worker flows, defined as one-year transitions. We use both a difference-in-difference approach – in which the impact of regulations is identified by exploiting likely cross-industry differences in their impact – and standard time-series analysis – in which the effect of regulations is identified through regulatory changes over time. We find that the more restrictive the regulation, the smaller is the rate of within-industry job-to-job transitions, in particular towards permanent jobs. By contrast, we find no significant effect as regards separations involving an industry change or persistent joblessness. The extent of reinstatement in the case of unfair dismissal appears to be the most important regulatory determinant of gross worker flows. We also present a large battery of robustness checks that suggest that our findings are robust.

Keywords: reinstatement; unfair dismissals; job-to-job transitions; employment protection legislation; industry-specific human capital; resource reallocation; gross worker flows; cross-country data (search for similar items in EconPapers)
JEL-codes: J23 J24 J62 J63 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2012-04
New Economics Papers: this item is included in nep-eur and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published - revised version published in: Labour Economics, 2013, 21 (1), 25-41

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Related works:
Journal Article: Dismissal protection and worker flows in OECD countries: Evidence from cross-country/cross-industry data (2013)
Working Paper: Dismissal protection and worker flows in OECD countries: Evidence from cross-country/cross-industry data (2013)
Working Paper: Dismissal protection and worker flows in OECD countries: Evidence from cross-country/cross-industry data (2013)
Working Paper: Dismissal Protection and Worker Flows in OECD Countries: Evidence from Cross-country/Cross-industry Data (2012)
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