The Impact of Extended Employment Protection Laws on the Demand for Temporary Agency Workers

50 Pages Posted: 29 May 2018

See all articles by Alejandro Micco

Alejandro Micco

University of Chile

Pablo Munoz

University of California, Berkeley - Department of Economics

Date Written: Abril 4, 2018

Abstract

The incidence of alternative work arrangements has risen during recent decades, affecting the shape of the economy and leading to calls for changes in labor regulation. In this paper, we study the demand for temporary agency work (TAW) and the effects of a reform in Chile that increased the regulatory burden on TAW. In examining a sample of manufacturing plants, we not only show that plant-level volatility and relative size are key determinants of the demand for TAW, but also that both characteristics became more important after the change in regulation. We also evaluate the effects of the regulation on the plants’ performance. We find that plants using TAW increased their share of non-agency workers by around 12%, while their total employment shrank by 7% as a response to the regulation. Reassuringly, plants with higher shares of agency workers—consequently more exposed to the regulatory change—experienced larger changes in employment. Finally, we only find partial evidence of a differential negative effect on output, and we do not detect any significant impact of this regulation on value added.

Keywords: employment composition, employment protection and demand for temporary agency workers

JEL Classification: J41, J08

Suggested Citation

Micco, Alejandro and Munoz, Pablo, The Impact of Extended Employment Protection Laws on the Demand for Temporary Agency Workers (Abril 4, 2018). Available at SSRN: https://ssrn.com/abstract=3173817 or http://dx.doi.org/10.2139/ssrn.3173817

Alejandro Micco

University of Chile ( email )

Pío Nono Nº1, Providencia
Santiago, R. Metropolitana 7520421
Chile

Pablo Munoz (Contact Author)

University of California, Berkeley - Department of Economics ( email )

579 Evans Hall
Berkeley, CA 94709
United States

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