Abstract
Job-security regulations may impose substantial rigidities on the ability of firms to adjust employment levels over the business cycle. The effects of dismissal costs on employment and unemployment are difficult to estimate, and empirical evidence on their net effects is ambiguous. Using cross-sections, Grubb and Wells (1993) argued that stricter provisions are negatively correlated with employment, while Bertola (1990) found no relation between job-security provisions and medium- and long-run employment. These mixed results are not surprising, given that cross-section studies are subject to omitted variable bias, simultaneity problems and possible endogeneity of the regulations.
I am grateful to George Akerlof, Antonio Cabrales, Guillermo Calvo, Albert Fishlow, Reuben Gronau, Hugo Hopenhayn, Bernardo Kugler, Ricardo Paes de Barros, Carmen Pagés-Serra, Ron Oaxaca, Richard Blundell, Dan Hamermesh, Jim Heckman, David Levine and Derek Leslie for helpful comments, and Manuel Badenes for research assistance. Fedesarrollo provided financial support.
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Kugler, A.D. (2004). The Impact of Firing Costs on Turnover and Unemployment: Evidence from Colombia. In: Bour, E., Heymann, D., Navajas, F. (eds) Latin American Economic Crises. International Economic Association. Palgrave Macmillan, London. https://doi.org/10.1057/9781403943859_12
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DOI: https://doi.org/10.1057/9781403943859_12
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