Employment Protection Reforms: From Firm-Level Effects to Aggregate Outcomes

Pierre Cahuc, Pauline Carry, Franck Malherbet and Pedro Martins
Additional contact information
Pierre Cahuc: Sciences Po
Pauline Carry: Princeton University
Franck Malherbet: CREST-ENSAE, Ecole Polytechnique

Working Papers from Princeton University, Department of Economics, Industrial Relations Section.

Abstract: Employment protection legislation often varies with firm or establishment size and age, and many evaluations of EPL reforms exploit these thresholds. This paper develops a search-and-matching model with multi-establishment firms to disentangle direct effects from general-equilibrium spillovers. We combine the model with quasi-experimental evidence from a 2009 Portuguese reform that restricted fixed-term contracts in young establishments of large firms. Spillovers barely distort the reduced-form estimate, yet they overturn the aggregate conclusion: extrapolating the reduced-form estimate implies a 1.51% employment decline, compared with a 0.11% increase in general equilibrium. Counterfactuals show that conditioning EPL on size versus age can yield opposite welfare effects, even when employment effects are similar, and that fixed-term contract and firing restrictions must be evaluated jointly.

JEL-codes: J68 K31 (search for similar items in EconPapers)
Date: 2026-09
References: Add references at CitEc
Citations:

Downloads: (external link)
https://irs.princeton.edu/publications/working-papers/666
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
Working Paper: Employment Protection Reforms: From Firm-Level Effects to Aggregate Outcomes (2026)
Working Paper: Employment Protection Reforms: From Firm-Level Effects to Aggregate Outcomes (2026)
Working Paper: Employment Protection Reforms: From Firm-Level Effects to Aggregate Outcomes (2026)
Working Paper: Employment Protection Reforms: From Firm-Level Effects to Aggregate Outcomes (2026)
Working Paper: Employment Protection Reforms: From Firm-Level Effects to Aggregate Outcomes (2026)
Working Paper: Employment Protection Reforms: From Firm-Level Effects to Aggregate Outcomes (2026)
Working Paper: Employment Protection Reforms: From Firm-Level Effects to Aggregate Outcomes (2026)
Working Paper: Employment protection reforms: from firm-level effects to aggregate outcomes (2026)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pri:indrel:666

Access Statistics for this paper

More papers in Working Papers from Princeton University, Department of Economics, Industrial Relations Section. Contact information at EDIRC.
Bibliographic data for series maintained by Bobray Bordelon ().