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Employment Protection Legislation and Job Reallocation across Sectors, Firms and Workers: A Survey

Author

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  • Cahuc, Pierre

    (Sciences Po, Paris)

  • Palladino, Marco G.

    (Banque de France)

Abstract

This paper provides a review of the existing literature on the effects of employment protection legislation (EPL) on job allocation across industries, firms, and workers, and its implications for innovation and economic growth. We analyze empirical studies to assess how EPL influences resource allocation, firm dynamics, and labor market segmentation. The review highlights the heterogeneous effects of EPL on different firms and workers' groups. Additionally, we discuss the channels identified in the structural literature through which EPL-induced job reallocation affects productivity, innovation, and overall growth. While existing evidence demonstrates the significant influence of EPL on all these outcomes, further quantification of these effects remains a research challenge.

Suggested Citation

  • Cahuc, Pierre & Palladino, Marco G., 2024. "Employment Protection Legislation and Job Reallocation across Sectors, Firms and Workers: A Survey," IZA Discussion Papers 16747, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp16747
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    References listed on IDEAS

    as
    1. Hijzen, Alexander & Mondauto, Leopoldo & Scarpetta, Stefano, 2017. "The impact of employment protection on temporary employment: Evidence from a regression discontinuity design," Labour Economics, Elsevier, vol. 46(C), pages 64-76.
    2. Federico Cingano & Marco Leonardi & Julián Messina & Giovanni Pica, 2016. "Employment Protection Legislation, Capital Investment and Access to Credit: Evidence from Italy," Economic Journal, Royal Economic Society, vol. 126(595), pages 1798-1822, September.
    3. Tito Boeri & Pietro Garibaldi, 2007. "Two Tier Reforms of Employment Protection: a Honeymoon Effect?," Economic Journal, Royal Economic Society, vol. 117(521), pages 357-385, June.
    4. Diego Restuccia & Richard Rogerson, 2008. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 707-720, October.
    5. Haltiwanger, John & Scarpetta, Stefano & Schweiger, Helena, 2014. "Cross country differences in job reallocation: The role of industry, firm size and regulations," Labour Economics, Elsevier, vol. 26(C), pages 11-25.
    6. Samaniego, Roberto M., 2006. "Do Firing Costs Affect The Incidence Of Firm Bankruptcy?," Macroeconomic Dynamics, Cambridge University Press, vol. 10(4), pages 467-501, September.
    7. Sandrine CAZES & Mirco TONIN, 2010. "Employment protection legislation and job stability: A European cross-country analysis," International Labour Review, International Labour Organization, vol. 149(3), pages 261-285, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    job protection; job allocation; economic growth; productivity; innovation;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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