Dismissal regulation and hiring and dismissal decisions: a decisive factor? the case of the French labor market reforms

Most OECD countries divide dismissals into different types, depending on their grounds, as either disciplinary or economic. Restricted to individual dismissals, this article seeks to better understand how the differences between these two grounds with regard to statutory provisions result in the dismissal behavior of employers. Do employers choose this designation to minimize termination costs (severance payment and damages)? Using an original database of French establishments from 1999 to 2009, this article aims to analyze the factors influencing employers' use of economic and personal dismissals, providing insights into the enforcement capability of legal dismissal rules and the part played by strategic behavior. In our view, strategic behaviors should be reflected in the factors influencing both types of dismissal decisions identically, whereas compliance with legal provisions induces contrasting influences. Thus, the hypothesis tested-called the uniqueness of the model of dismissal-is the absence of specificity of the determinants, especially regarding the economic conditions of the firm and related human resource management characteristics, between the two types of dismissal. The results highlight the existence of two quite different models of dismissal even though the personal dismissal determinants are not orthogonal to the economic conditions of the firm. Economic dismissals are essentially explained by the economic conditions of firms, whereas personal dismissals are linked to the propensity of human resource management to retain employees.