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The economics of employment protection

By John T. Addison

Abstract

Empirical investigation of the labor market consequences of employment protection has mushroomed since Lazear's (1990) pioneering study. Having sketched the theoretical background, we chart the course of the modern empirical literature. We focus mainly on dismissals protection, distinguishing between the themes of employment and unemployment development and labor market dynamics proper. Our discussion of employment and unemployment largely deals with the effect of employment protection on levels of these outcome indicators. We distinguish between overall and compositional effects (e.g., by demographic group and type of contract), between developing and industrialized nations, and identify some key control variables. Our discussion of labor market dynamics focuses on the speed of adjustment issue and on gross flows. It also formalizes the link between analyses of levels and changes in variables. At all times potential offsets to the adverse effects of employment protection receive consideration. 1 "By comparison [with the effects of unions and social security systems] time spent worrying about strict labor market regulations, employment protection and minimum wages is probably time largely wasted " (Nickell and Layard, 1999, p. 3030). I

Year: 2003
OAI identifier: oai:CiteSeerX.psu:10.1.1.195.677
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