Employment Protection Legislation and the Size of Firms

Garibaldi, Pietro; Pacelli, Lia; Borgarello, Andrea

doi:10.2139/ssrn.472762

Cited by 42 publications

(52 citation statements)

References 7 publications

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“…Employment protection legislation, which imposes higher unfair dismissal costs on firms that employ more than 15 employees, was found to reduce business size and growth for firms that were just below the size threshold. Using the same data source, Garibaldi et al (2004) find results that are consistent with Schivardi et al (2004). The German Protection Against Dismissal Act allows firms above a certain size threshold to sue for wrongful termination.…”

Section: Literature Reviewsupporting

confidence: 87%

Do Small Group Health Insurance Regulations Influence Small Business Growth?

Kapur¹,

Karaca‐Mandic²,

Gates³

et al. 2006

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-iii - PREFACEThe cost of health insurance has been the primary concern of small business owners for several decades. State small group health insurance reforms, implemented in the 1990s, aimed to control the variability of health insurance premiums and to improve access to health insurance.These small group reforms only affected firms within a specific size range, and the definition of the upper size threshold for small firms varied by state and over time. The primary intended result of these reforms was to increase the propensity of small firms to offer health insurance. However, because of the way these regulations were crafted, an unintended consequence of the reforms may have been to affect the size of small firms around the legislative threshold. Several studies have examined the effect of health insurance mandates on the propensity of small firms to offer health insurance. These studies generally find little to no effect of the mandates. In this paper, we examine the effect of small group reforms on small business size and find some evidence that firms that were near the threshold adjusted their size.By providing a more complete picture of the intended and unintended effects of policy reforms in which the implementation is based upon a specific firm size threshold, the research should help inform the development effective policies to assist small businesses. The research should be of interest to policymakers at both the state and federal level as well as businesses and others interested in the role of regulation in expanding access to health insurance and the effect of size thresholds in policy implementation. The work was completed under the auspices of the Kauffman-RAND Center for the Study of Small Business and Regulation and was funded by the Kauffman Foundation.The RAND Institute for Justice is an independent research program within the RAND Corporation. The mission of the RAND Institute for Civil Justice (ICJ), a division of the RAND Corporation, is to improve private and public decisionmaking on civil legal issues by supplying policymakers and the public with the results of objective, empirically based, analytic research.The ICJ facilitates change in the civil justice system by analyzing trends and outcomes, identifying and evaluating policy options, and bringing together representatives of different interests to debate alternative solutions to policy problems. The Institute builds on a long tradition of RAND research characterized by an interdisciplinary, empirical approach to public policy issues and rigorous standards of quality, objectivity, and independence. ICJ research is supported by pooled grants from corporations, trade and professional associations, and individuals; by government grants and contracts; and by private foundations.The Institute disseminates its work widely to the legal, business, and research communities, and to the general public. In accordance with RAND policy, all Institute research products are subject -ivto peer review before publication. ICJ publications do not necess...

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Section: Literature Reviewsupporting

confidence: 87%

Do Small Group Health Insurance Regulations Influence Small Business Growth?

Kapur¹,

Karaca‐Mandic²,

Gates³

et al. 2006

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“…Kugler andPica (2003, 2008) have analyzed the e¤ect of this reform, and found that both in ‡ow and out ‡ow of employment in small …rms decreased after the reform relative to the corresponding ‡ows in larger …rms. Similar results were obtained by Cingano et al (2010), Garibaldi et al (2004), who showed that job reallocation decreased in small …rms after the reform in Italy. Schivardi and Torrini (2004) studied the e¤ects of the same reform on the …rm size distribution in Italy.…”

Section: Empirical Studiessupporting

confidence: 86%

“…Their results indicated that removing the threshold in Italian EPL would increase average …rm size by less than 1 percent. These results are supported by Garibaldi et al (2004), who found that …rms close to the 15 employees shows more persistence than other …rms, and that they are more likely to move backward than upward.…”

Section: Empirical Studiessupporting

confidence: 61%

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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“…Ichino et al (2003) argue that judges are biased by labour market conditions in their court ruling. Garibaldi et al (2004) study the effect of a size threshold in the reinstatement clause, and find that there is some evidence of an increase in employment persistence around the threshold, but the size of the effect is quantitatively small. This paper studies a deferred wage scheme, called Trattamento di Fine Rapporto (Remuneration upon Separation, TFR in the rest of the paper).…”

Section: Deferred Wages In the Italian Institutional Settingmentioning

confidence: 99%

Do larger severance payments increase individual job duration?

Garibaldi¹,

Pacelli²

2008

Labour Economics

Self Cite

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This paper analyzes the effect of severance payments on the probability of separation at given tenure, wages and other individual and firm characteristics. It studies a mandatory deferred wage scheme of the Italian labour market (Trattamento di Fine Rapporto, TFR). Deferred wages increase job duration if two conditions hold: wages are rigidly set outside the employer-employee relationship, and past provisions are accumulated at interest rates that are below market rates. Under such circumstances, workers who withdraw from their accumulated stock of unpaid wages should experience, at given tenure, a subsequent increase in the probability of separation. This prediction appears empirically robust and quantitatively sizeable. A withdrawal of 60% of the TFR stock (the median observed withdrawal) increases the instantaneous hazard rate by almost 20%. In other words, an individual with at least ten years of tenure that experiences an early withdrawal increases his/her hazard rate from 10% to about 12%. The empirical result takes into account the existence of unobserved heterogeneity and a variety of further robustness tests.

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Employment Protection Legislation and the Size of Firms

Cited by 42 publications

References 7 publications

Do Small Group Health Insurance Regulations Influence Small Business Growth?

Do Small Group Health Insurance Regulations Influence Small Business Growth?

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

Do larger severance payments increase individual job duration?

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