The Impact of Extending Employment Protection to Agency Workers on Firms

33 Pages Posted: 29 May 2018 Last revised: 23 Mar 2021

See all articles by Alejandro Micco

Alejandro Micco

University of Chile

Pablo Munoz

University of California, Berkeley - Department of Economics

Date Written: March, 2021

Abstract

We study the impact of a reform that extended employment protection to temporary agency workers. Leveraging data of manufacturing firms, we show that plants more exposed to the regulation experienced a decrease in revenues and total employment, and that these effects were attenuated in industries with high elasticity of substitution between agency and non-agency workers. We also present evidence that labor misallocation increased because of the regulation, especially at plants in sectors with high elasticity of substitution. A simple model of labor demand in the presence of agency work rationalizes these results.

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 Extending Employment Protection to Agency Workers on Firms (March, 2021). 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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