From Ultima Ratio to Mutual Consent: The Effects of Changing Employment Protection Doctrine

42 Pages Posted: 8 Jul 2019

See all articles by Cyprien Batut

Cyprien Batut

Paris School of Economics (PSE)

Eric Maurin

Paris School of Economics (PSE)

Abstract

In many countries, the termination of employment contracts has to be either on employer initiative or on employee initiative. Furthermore, the cost of the procedure is borne mainly by the contracting party who takes the initiative and there is little room for sharing costs. The implicit doctrine is that employment termination has to be the last resort, the ultima ratio. In 2008, the French government initiated a change in doctrine: it became possible to terminate employment contracts by mutual consent, at lower costs. Building on firm-level data, we develop an event analysis which reveals that the reform was followed by a decline in dismissals as well as by a significant rise in overall separation rates. By promoting separation by mutual consent, the reform reduced labor litigation risks, boosted workers' flows, but, eventually, we do not detect any effect on firms' employment levels.

Keywords: employment termination, dismissal, quit, labor litigation, severance payment

JEL Classification: J23, J52, J63

Suggested Citation

Batut, Cyprien and Maurin, Eric, From Ultima Ratio to Mutual Consent: The Effects of Changing Employment Protection Doctrine. IZA Discussion Paper No. 12440, Available at SSRN: https://ssrn.com/abstract=3415786 or http://dx.doi.org/10.2139/ssrn.3415786

Cyprien Batut (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Eric Maurin

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
45
Abstract Views
519
PlumX Metrics