The Detrimental Effect of Job Protection on Employment: Evidence from France

Labor Market Externalities of Pre-Retirement Employment Protection

“…When it comes to wages the results are more mixed with van der Wiel (2010) nding increases in wages while Leonardi and Pica (2013) nding decreases as a result of stricter EPL. Closest to this paper, Cahuc et al (2019) show that stricter EPL leads to increased separation rates for workers nearing the additional coverage, highlighting the importance of considering potential negative externalities for uncovered workers. This nding could be particularly relevant for the population of older workers who already have low employment rates and experience labor market discrimination.…”

Financial and Labour Obstacles and Firm Employment: Evidence from Europe and Central Asia Firms

“…Labour regulations, which often aim to protect permanent workers, create substantial layoff costs for permanent workers compared to those of non-permanent workers. These costs include firing costs (e.g., separation pay, costs associated with lawsuits), search costs (e.g., fees to recruitment agencies, advertising costs), recruitment costs (e.g., viewing applications, conducting interviews), and training costs for new workers [4,[45][46][47] among others, observed that a greater number of labour protection regulations causes higher layoff costs and thus reduces permanent employment at the firm level [47], also showed that labour regulation reforms in Europe that aim to relax restrictions on layoffs raise the proportion of permanent workers [48], found evidence of a substantial increase in the permanent worker ratio after reforms of employment protection that lowered the firing costs in Italy in 2015.…”

Life-Cycle Worker Flows and Cross-Country Differences in Aggregate Employment

“…We calibrate firing costs to equal the unweighted average mandated severance payments (in terms of the average equilibrium wage) obtained from the OECD EPL database (oec [2013]) for jobs with tenure from one to twelve years. This choice is motivated by evidence that mandated severance payments are lower bound for the value of nontransferable firing costs reflecting procedural, red-tape costs (Cahuc et al [2019]), which correspond to the component that is relevant for match dissolution decisions. In addition, we calibrate unemployment benefits to match the (unweighted) average replacement ratios across unemployment duration levels from oec [2023].…”