Who Pays for it? The Heterogeneous Wage Effects of Employment Protection Legislation

Leonardi, Marco; Pica, Giovanni

doi:10.1111/ecoj.12022

Cited by 118 publications

(112 citation statements)

References 52 publications

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“…dismissals of more than five employees within 120 days. Leonardi and Pica (2013) show that the reform on collective dismissals does no interfere with the results on the individual dismissal reform under consideration. Banking Association and a pool of leading banks to gather and share information on borrowers.…”

Section: The Institutional Backgroundmentioning

confidence: 88%

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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Section: The Institutional Backgroundmentioning

confidence: 88%

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

et al. 2014

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“…Analyzing an Italian reform in 1990, Leonardi and Pica (2013) find that entry wages were reduced as the stringency of employment protection increased, while incumbents remained unaffected. According to van der Wiel (2010), longer periods of advance notice before a dismissal contribute to higher wages among Dutch workers.…”

Section: Effects On Wagesmentioning

confidence: 99%

“…There is only scant evidence on the effects on wages with some studies reporting positive (van der Wiel, 2010) and some negative effects (eg. Leonardi and Pica, 2013) We contribute to the empirical literature by examining the effects of labor market regulations based on longitudinal multi-country employer-employee data. To the best of our knowledge, this is the first effort linking personnel data for a large number of firms across national borders.…”

Section: Introductionmentioning

confidence: 99%

Seniority rules, worker mobility and wages: Evidence from multi-country linked employer-employee data

2018

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We construct a multi-country employer-employee data to examine the consequences of employment protection. We identify the effects by comparing worker exit rates between units of the same firm that operate in two countries that have different seniority rules. The results show that last-in-first-out rules reduce dismissals of older, more senior workers, especially in shrinking multinational firms, and increase their bargaining power, resulting in a steeper seniority-wage profile.

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“…However, evidence on wage effects is very scarce and not very conclusive. Leonardi and Pica (2013) analyse an increase in firing costs implemented in Italy for small firms and find that more stringent employment protection has a negative impact on entry and subsequent wages. Martins (2009) finds no reaction of wages to an increase in dismissal-for-cause costs only for large firms in Portugal, and van der Wiel (2010) finds positive wage effects of extending employer's term of notice in the Netherlands.…”

Section: Introductionmentioning

confidence: 99%

Wage effects of non-wage labour costs

Cervini-Plá

Ramos

Silva

2014

European Economic Review

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JEL classification: C23 D31 J31 Keywords:Dismissal costs Payroll tax Evaluation of labour market reforms Difference-in-difference Matching model a b s t r a c tWe study wage effects of two important elements of non-wage labour costs: firing costs and payroll taxes. We exploit a reform that introduced substantial reduction in these two provisions for unemployed workers aged less than 30 and over 45 years who got a permanent job. A matching model with heterogeneous workers predicts positive wage effects of reducing firing costs but ambiguous wage effects of reducing payroll taxes, for both new entrant and incumbent workers. Difference-in-differences estimates and simulation of the model show positive wage effects for both new entrant and incumbent workers. The reduction in firing costs accounts for up to half of the overall wage increase for new entrants but only 10% for incumbents.

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Who Pays for it? The Heterogeneous Wage Effects of Employment Protection Legislation

Cited by 118 publications

References 52 publications

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

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

Seniority rules, worker mobility and wages: Evidence from multi-country linked employer-employee data

Wage effects of non-wage labour costs

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