Employment Consequences of Employment Protection Legislation

Skedinger, Per

doi:10.2139/ssrn.2101663

Cited by 30 publications

(33 citation statements)

References 77 publications

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“…This e¤ect arise since employers incorporates potential future costs in case of layo¤s already in the hiring decision (Skedinger, 2011). If the last-in-…rst-out principle in the Swedish employment protection legislation prevents …rms from hiring more personnel, we thus expect that …rms with ten employees or less were more likely to hire one additional employee compared to our control group after the reform.…”

Section: Theory and Hypothesesmentioning

confidence: 98%

“…One argument for having more liberal rules for small …rms is that these …rms are more sensitive to cost-increasing e¤ects of employment protection than larger …rms. On the other hand, the more liberal rules for small …rms could create incentives for …rms not to cross the size threshold where they would be subject to the more stricter rules (Skedinger, 2011).…”

Section: Theory and Hypothesesmentioning

confidence: 99%

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Employment protection legislation and firm growth: evidence from a natural experiment

Bornhäll¹,

Daunfeldt

Rudholm³

2016

Ind Corp Change

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A natural experiment is used to identify the causal relationship between employment protection legislation and …rm growth. The natural experiment occurred in Sweden in 2001, when an exemption made it possible for …rms with less than eleven employees to exclude two workers from the last-in-…rst-out principle when dismissing personel. The estimated average treatment e¤ect of the reform show that the number of employees increased with 0.135 percent in …rms with 5-9 employees relative to …rms with 10-15 employees, which corresponds to over 5,000 additional jobs per year created by the reform. Firms with ten employees, just below the size threshold, became 3.4 percent less likely to increase their workforce to a level surpassing the threshold, indicating that the last-in-…rst-out rule prevented these …rms from growing. Thus, employment protection legislation seems to act as a growth barrier for small …rms.

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Section: Theory and Hypothesesmentioning

confidence: 98%

Section: Theory and Hypothesesmentioning

confidence: 99%

Employment protection legislation and firm growth: evidence from a natural experiment

Bornhäll¹,

Daunfeldt

Rudholm³

2016

Ind Corp Change

View full text Add to dashboard Cite

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“…An occurrence that may have created more flexibility, yet, at same time, increased the labour market segmentation and deepened the insider-outsider divide (Blanchard and Landier 2002;Cahuc and PostelVinay 2002). This type of dualism can have a strong negative impact on already marginalised groups, especially younger individuals, who may be pushed into involuntary temporary employment (Skedinger 2011). Future research may want to pose the question to what extent this type of regulatory dualism also pushes individuals into involuntary entrepreneurship.…”

Section: Policy Implicationsmentioning

confidence: 99%

Habitual entrepreneurs in the making: how labour market rigidity and employment affects entrepreneurial re-entry

Larsson

Wennberg

2018

Small Bus Econ

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We investigate the impact of country-level labour market regulations on the re-entry decision of experienced entrepreneurs, whereby they become habitual entrepreneurs. Multilevel logit models on entry decisions among 15,709 individuals in 29 European countries show that labour market regulations have a positive influence on the decision to re-enter into entrepreneurship. This positive impact is stronger among individuals holding wage jobs at the time of re-entry compared to those that do not. Our results indicate that novice and habitual entrepreneurs may respond very differently to labour market rigidity. We discuss and provide tentative explanations for these differences and outline potential policy implications.

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“…While there is a large body of evidence confirming this theoretical prediction (see the recent review by Skedinger, 2011), less is known about the impact of dismissal costs on capital deepening and productivity. A small but growing empirical literature has recently started to analyze the effects of EPL on capital intensity and productivity going beyond country-or sector-level data.…”

Section: Introductionmentioning

confidence: 95%

Employment Protection Legislation, Capital Investment and Access to Credit: Evidence from Italy

et al. 2014

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Employment protection may affect both productivity and capital investment because higher adjustments costs hamper allocative efficiency and may therefore affect both the optimal capitallabor input mix and total factor productivity. To estimate the impact of dismissal costs on capital deepening and productivity we exploit a reform that introduced unjust-dismissal costs in Italy for firms below 15 employees, leaving firing costs unchanged for bigger firms. We provide evidence that the increase in firing costs induced capital deepening and a decline in total factor productivity in small firms relative to larger firms after the reform. We also find that capital deepening is more pronounced at the low-end of the capital distribution -where the reform arguably hit harderand among firms endowed with a larger amount of liquid resources, that have more room to react thanks to an easier access to the credit market. Our results also indicate that the EPL reform reduced the probability to access the credit market, possbily because stricter EPL reduces both the value of the firm and the amount of internal resources that the firm can pledge as collateral against lenders.

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Employment Consequences of Employment Protection Legislation

Cited by 30 publications

References 77 publications

Employment protection legislation and firm growth: evidence from a natural experiment

Employment protection legislation and firm growth: evidence from a natural experiment

Habitual entrepreneurs in the making: how labour market rigidity and employment affects entrepreneurial re-entry

Employment Protection Legislation, Capital Investment and Access to Credit: Evidence from Italy

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