Firing Costs and Labour Demand: How Bad is Eurosclerosis?

Bentolila, Samuel; Bertola, Giuseppe

doi:10.2307/2298020

Cited by 1,148 publications

(959 citation statements)

References 12 publications

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“…Studies by Nickell (1978), Bentolila and Bertola (1990) and Bertola (1990) show that firms may respond to the presence of positive firing costs by reducing both the level of hirings and firings. 1 Kugler and Pica (2008) provide empirical evidence on the negative relationship between EPL and the hiring rate, while Trevisan (2008) shows that the effect is strongest for hirings in permanent positions since firms may decide to hire fewer workers in permanent jobs and replace those by apprenticeships as to circumvent strict EPL.…”

Section: Job Quit Behaviormentioning

confidence: 99%

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Quit behavior and the role of job protection

Gielen

Tatsiramos

2012

Labour Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. Job protection reduces job turnover by changing firms' hiring and firing decisions. Yet the effect of job protection on workers' quit decisions and post-quit outcomes is still unknown. We present the first evidence using individual panel data from 12 European countries, which differ both in worker turnover rates and in the level of job protection. We find that workers are less likely to quit their job in countries with more job protection, but conditional on quitting they receive higher wages. This evidence can be explained by increased mobility costs associated with higher expected risk of post-quit layoff and job mismatch.JEL Classification: J28, J62

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Section: Job Quit Behaviormentioning

confidence: 99%

“…Nickell, 1978;Bentolila and Bertola, 1990;. Job protection may not only affect firms' decisions but may also alter workers' job-to-job mobility decisions.…”

Section: Introductionmentioning

confidence: 99%

Quit behavior and the role of job protection

Gielen

Tatsiramos

2012

Labour Economics

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“…where E[·] denotes the expectation operator given the information set available to the firm at time t, ρ denotes the real interest rate, v is the (intertemporal) marginal value of workers, Y g represents the marginal product of labour at time s, and denotes instantaneous marginal profits at time s. Equation (3) is similar to the expressions in Bentolila and Bertola (1990) except each marginal worker can only work for the firm for a maximum interval of (T -t). Note that (T -t) is the maximum possible tenure since workers might quit or get fired earlier.…”

Section: Modelling the Firing Decisionmentioning

confidence: 99%

An essay on the generational effect of employment protection

Chen¹,

Zoëga²

2010

Mathematical Social Sciences

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“…Bentolila and Bertola (1990), Hopenhayn and Rogerson (1993) and Ljungqvist. Blanchard and Tirole (2008) and Michau (2009) show that optimal layo¤ taxes are positive if workers are risk averse and cannot borrow against future income.…”

Section: Introductionmentioning

confidence: 99%

Employment Protection, Technology Choice, and Worker Allocation

2011

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Using a country-industry panel dataset (EUKLEMS) we uncover a robust empirical regularity, namely that high-risk innovative sectors are relatively smaller in countries with strict employment protection legislation (EPL). To understand the mechanism, we develop a two-sector matching model where …rms endogenously choose between a safe technology with known productivity and a risky technology with productivity subject to sizeable shocks. Strict EPL makes the risky technology relatively less attractive because it is more costly to shed workers upon receiving a low productivity draw. We calibrate the model using a variety of aggregate, industry and micro-level data sources.We then simulate the model to re ‡ect both the observed di¤erences across countries in EPL and the observed increase since the mid-1990s in the variance of …rm performance associated with the adoption of information and communication technology. The simulations produce a di¤erential response to the Acknowledgements: We would like to thank Wouter den Haan, Egbert Jongen, Roland Luttens, Marcel Jansen, participants of CAED, Tokyo and ECB/CEPR Labour Market Workshop, Frankfurt as well as seminar participants at the University of Copenhagen, CPB, the Tinbergen Institute, VU Universiy, University of Maastricht and Nederlandsche Bank for useful comments and suggestions. 1 arrival of risky technology between low-and high-EPL countries that coincides with the …ndings in the data. The described mechanism can explain a considerable portion of the slowdown in productivity in the EU relative to the US since 1995.

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Firing Costs and Labour Demand: How Bad is Eurosclerosis?

Cited by 1,148 publications

References 12 publications

Quit behavior and the role of job protection

Quit behavior and the role of job protection

An essay on the generational effect of employment protection

Employment Protection, Technology Choice, and Worker Allocation

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