Job Security and the Age-Composition of Employment: Evidence from Chile

Office of the Chief Economist, InterAmerican Development Bank (OCE) Working Paper No. 398

37 Pages Posted: 22 Nov 1999

See all articles by Carmen Pages

Carmen Pages

Inter-American Development Bank (IADB); IZA Institute of Labor Economics

Claudio E. Montenegro

World Bank Group; Universidad de Chile, Economics Department

Multiple version iconThere are 2 versions of this paper

Date Written: September 1999

Abstract

This paper develops and tests a mechanism by which job security affects the age-composition of employment. This mechanism is based on the relative costs of dismissing young versus older workers resulting from job security provisions that are related to tenure. Using 39 consecutive annual household surveys from Chile, we find that job security is associated with a substantial decline in the wage employment-to-population rate of young workers. In contrast, we do not find such decline in young self-employment rates or in the wage-employment rates of older workers. Our results also indicate that the negative effect on youth employment rate is driven by the slope of the severance-pay profile. Regarding aggregate employment rates, we find that a raise in tenure-based severance pay reduces long-run employment, while a raise in a flat severance pay would marginally increase it.

JEL Classification: E24, J23, J65

Suggested Citation

Pages-Serra, Carmen and Montenegro, Claudio E., Job Security and the Age-Composition of Employment: Evidence from Chile (September 1999). Office of the Chief Economist, InterAmerican Development Bank (OCE) Working Paper No. 398, Available at SSRN: https://ssrn.com/abstract=183027 or http://dx.doi.org/10.2139/ssrn.183027

Carmen Pages-Serra (Contact Author)

Inter-American Development Bank (IADB) ( email )

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IZA Institute of Labor Economics

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Claudio E. Montenegro

World Bank Group ( email )

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Universidad de Chile, Economics Department

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Santiago
Chile

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