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Job security and the age-composition of employment: evidence from Chile

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Author Info
Carmen Pagés
Claudio E. Montenegro ()

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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 a decline in young self-employment rates or in the wage employment rates of older workers. Comparing results for men and women and using measures of relative dismissal costs, we find that the adverse effect of job security on youth employment is driven by the link between severance payments and tenure. We also find that job security does not have a significant impact on overall aggregate employment, participation or unemployment rates.

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File URL: http://econ.uchile.cl/public/Archivos/pub/29c8ac92-b9f9-44fb-bd8a-347352356478.pdf
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Publisher Info
Article provided by University of Chile, Department of Economics in its journal Estudios de Economia.

Volume (Year): 34 (2007)
Issue (Month): 2 Year 2007 (December)
Pages: 109-139
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Handle: RePEc:udc:esteco:v:34:y:2007:i:2:p:109-139

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Web page: http://www.econ.uchile.cl/
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Related research
Keywords: Job security employment composition severance pay Chile job tenure.

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Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June. [Downloadable!] (restricted)
  2. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August. [Downloadable!] (restricted)
  3. Lawrence M. Kahn, 2007. "The Impact of Employment Protection Mandates on Demographic Temporary Employment Patterns: International Microeconomic Evidence," Economic Journal, Royal Economic Society, vol. 117(521), pages 333-356, 06. [Downloadable!] (restricted)
    Other versions:
  4. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October. [Downloadable!] (restricted)
  5. Dutta Roy, Sudipta, 2004. "Employment dynamics in Indian industry: adjustment lags and the impact of job security regulations," Journal of Development Economics, Elsevier, vol. 73(1), pages 233-256, February. [Downloadable!] (restricted)
  6. Anderson, Patricia M, 1993. "Linear Adjustment Costs and Seasonal Labor Demand: Evidence from Retail Trade Firms," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 1015-42, November. [Downloadable!] (restricted)
  7. Giuseppe Bertola & Francine D. Blau & Lawrence M. Kahn, 2002. "Labor Market Institutions and Demographic Employment Patterns," NBER Working Papers 9043, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Daniel S. Hamermesh & Gerard A. Pfann, 1996. "Adjustment Costs in Factor Demand," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1264-1292, September. [Downloadable!] (restricted)
    Other versions:
  9. Maloney, William F, 1999. "Does Informality Imply Segmentation in Urban Labor Markets? Evidence from Sectoral Transitions in Mexico," World Bank Economic Review, Oxford University Press, vol. 13(2), pages 275-302, May.
  10. Ahsan, Ahmad & Pages, Carmen, 2007. "Are all labor regulations equal ? Assessing the effects of job security, labor dispute, and contract labor laws in India," Policy Research Working Paper Series 4259, The World Bank. [Downloadable!]
  11. Nickell, Stephen, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer. [Downloadable!] (restricted)
  12. Davis, Steven J & Haltiwanger, John C, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 819-63, August. [Downloadable!] (restricted)
    Other versions:
  13. Claudio Montenegro & Carmen Pages, 2003. "Who Benefits from Labor Market Regulations? Chile 1960-1998," NBER Working Papers 9850, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  14. Timothy Besley & Robin Burgess, 2004. "Can Labor Regulation Hinder Economic Performance? Evidence from India," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 91-134, February. [Downloadable!] (restricted)
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  15. Fallon, Peter R. & Lucas, Robert E. B., 1993. "Job security regulations and the dynamic demand for industrial labor in India and Zimbabwe," Journal of Development Economics, Elsevier, vol. 40(2), pages 241-275, April. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Amil Petrin & Jagadeesh Sivadasan, 2006. "Job Security Does Affect Economic Efficiency: Theory, A New Statistic, and Evidence from Chile," NBER Working Papers 12757, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Esteban Puentes & Dante Contreras & Claudia Sanhueza, 2007. "Self-Employment in Chile, long run trends and education and age structures changes," Estudios de Economia, University of Chile, Department of Economics, vol. 34(2 Year 20), pages 203-247, December. [Downloadable!]
  3. Armida Alisjahbana & Muhammad Purnagunawan, 2004. "The Impact of Job Security Regulations on Employment and Hours of Work: Empirical Evidence for Indonesia," Working Papers in Economics and Development Studies (WoPEDS) 200405, Department of Economics, Padjadjaran University, revised Nov 2004. [Downloadable!]
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