Tuesday, December 18, 2007

[IWS] IADB: The Economic Effects of Employment Protection: Evidence from International Industry-Level Data [December 2007]

IWS Documented News Service
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations
-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor
---------------------- Stuart Basefsky
New York, NY 10016
-------------------------------Director, IWS News Bureau
________________________________________________________________________

Inter-American Development Bank (IADB)

Research Department Working Papers: WP-592

The Economic Effects of Employment Protection: Evidence from International Industry-Level Data
http://www.iadb.org/res/publications/pubfiles/pubWP-592.pdf
[full-text, 40 pages]

Author:
Pagés-Serra, Carmen; Micco, Alejandro

Published:
December 2007

Abstract:
This paper examines the economic effects of employment protection legislation in a sample of developed and developing countries. Implementing a difference-in-differences test lessens the potentially severe endogeneity and omitted variable problems associated with cross-country regressions. This test is based on the hypothesis that employment protection regulations are more binding in sectors of activity exposed to higher volatility in demand or supply shocks. The analysis indicates that more stringent legislation slows down job turnover by a significant amount, and that this effect is more pronounced in sectors that are intrinsically more volatile. The paper also finds that employment and value added decline in the most affected sectors, and employment and output effects are driven by a decline in the net entry of firms. In contrast, average employment per plant is not significantly affected.
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Stuart Basefsky                   
Director, IWS News Bureau                
Institute for Workplace Studies 
Cornell/ILR School                        
16 E. 34th Street, 4th Floor             
New York, NY 10016                        
                                   
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