Discussion Paper Details

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Title: Dismissal Disputes and Endogenous Sorting

Author(s): Pietro Garibaldi and Gerard Antonie Pfann

Publication Date: July 2015

Keyword(s): Disputes, Firing, Legislation and Sorting

Programme Area(s): Labour Economics

Abstract: Dismissal disputes occur mostly in recessions and often lead to long and costly contract termination procedures. This paper investigates how dispute procedures may affect the job-matching process. First we present a simple accounting framework that corresponds with general dismissal legislation, but is sufficiently flexible to accommodate country-specific legislation. Detailed information from a sample of 2,191 disputes that occurred in the Netherlands between 2006 and 2009 is used to adjust the framework to Dutch institutional specificity. The resulting equilibrium matching model is solved to explain endogenous sorting between lengthy and costly firing procedures. The model also rationalizes the longevity of the dual Dutch model and its political resilience.

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Bibliographic Reference

Garibaldi, P and Pfann, G. 2015. 'Dismissal Disputes and Endogenous Sorting'. London, Centre for Economic Policy Research.