DP4379 Dismissal Protection and Worker Flows in Small Establishments

Author(s): Thomas Bauer, Stefan Bender, Holger Bonin
Publication Date: May 2004
Keyword(s): difference-in-differences, employment protection, linked-employer-employee dataset
JEL(s): J21, J23, J58
Programme Areas: Labour Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4379

Based on a large employer-employee matched dataset, the Paper investigates the effects of variable enforcement of German dismissal protection legislation on the employment dynamics in small establishments. Specifically, using a difference-in-differences approach, we study the effect of changes in the threshold scale exempting small establishments from dismissal protection provisions on worker flows. In contrast to the predictions of the theory, our results indicate that there are no statistically significant effects of the dismissal protection legislation on worker turnover.