Dismissal protection and worker flows in OECD countries: Evidence from cross-country/cross-industry data

Abstract : Exploiting a unique dataset including cross-country comparable hiring and separation rates by type of transition for 24 OECD countries, 23 business-sector industries and 13 years, we study the effect of dismissal regulations on different types of gross worker flows, defined as one-year transitions. We use both a difference-in-difference approach - in which the impact of regulations is identified by exploiting likely cross-industry differences in their impact - and standard time-series analysis - in which the effect of regulations is identified through regulatory changes over time. We find that the more restrictive the regulation, the smaller is the rate of within-industry job-to-job transitions, in particular towards permanent jobs. By contrast, we find no significant effect as regards separations involving an industry change or leading to non-employment. The extent of reinstatement in the case of unfair dismissal appears to be the most important regulatory determinant of gross worker flows. We also present a large battery of robustness checks that suggest that our findings are robust.
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Submitted on : Sunday, April 14, 2013 - 7:36:29 PM
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Andrea Bassanini, Andrea Garnero. Dismissal protection and worker flows in OECD countries: Evidence from cross-country/cross-industry data. Labour Economics, Elsevier, 2013, 25, pp.25-41. ⟨10.1016/j.labeco.2012.12.003⟩. ⟨hal-00813034⟩

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