Who Pays for It? The Heterogeneous Wage Effects of Employment Protection Legislation
Università degli Studi di Milano; Institute for the Study of Labor (IZA)
Università degli Studi di Salerno - Department of Economics
IZA Discussion Paper No. 5335
Theory predicts that the wage effects of government-mandated severance payments depend on workers' and firms' relative bargaining power. This paper estimates the effect of employment protection legislation (EPL) on workers' individual wages in a quasi-experimental setting, exploiting a reform that introduced unjust-dismissal costs in Italy for firms below 15 employees and left firing costs unchanged for bigger firms. Accounting for the endogeneity of the treatment status, we find that high-bargaining power workers (stayers, white collar and workers above 45) are almost left unaffected by the increase in EPL, while low-bargaining power workers (movers, blue collar and young workers) suffer a drop both in the wage level and its growth rate.
Number of Pages in PDF File: 35
Keywords: costs of unjust dismissals, severance payments, policy evaluation, endogeneity of treatment status
JEL Classification: E24, J3, J65working papers series
Date posted: November 29, 2010
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo4 in 0.969 seconds