The Effect of Dismissals Protection on Employment: More on a Vexed Theme

This paper presents new results on the relationship between severance pay and labor market performance for a sample of 21 OECD countries, 1956-1984. Specifically, it evaluates Lazear's empirical argument that severance pay reduces employment and elevates joblessness. His findings are shown not...

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Bibliographic Details
Published in:Southern economic journal 2000-07, Vol.67 (1), p.105-122
Main Authors: Addison, John T., Teixeira, Paulino, Grosso, Jean-Luc
Format: Article
Language:English
Subjects:
Autocorrelation
Collective bargaining
Dismissal pay
Dismissals
Economic models
Effects
Employment
Employment indices
Evaluation
Firings
Labor force
Labor market
Labor markets
Labour market
Labour market structure
Legislation
Manycountries
Regression analysis
Samples
Severance pay
Standard error
Statistical significance
Studies
Time series
Unemployment
Variables
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Summary:This paper presents new results on the relationship between severance pay and labor market performance for a sample of 21 OECD countries, 1956-1984. Specifically, it evaluates Lazear's empirical argument that severance pay reduces employment and elevates joblessness. His findings are shown not to survive correction for errors in the data and the application of correct estimation procedures. Furthermore, adverse labor market consequences of severance pay are not detected in a dynamic characterization of the Lazear model. Limitations of the approach followed here are also addressed and contextualized.
ISSN:0038-4038
2325-8012
DOI:10.1002/j.2325-8012.2000.tb00323.x