SMU SOE Seminar (August 18, 2023): The Effects of Eliminating Employment Protection

Please click here if you are unable to view this page.

TOPIC:

THE EFFECTS OF ELIMINATING EMPLOYMENT PROTECTION

ABSTRACT Employment protection legislation (EPL) is pervasive but it rarely varies sharply at the worker level and its strength is rarely reduced among protected insiders. In this paper, we quantify and characterize the job-level consequences of a sharp elimination of EPL for maximally protected workers: older workers in Sweden. Swedish workers lose all protections when they turn 67. Our research design uses bunching methods to construct excess separations at this cutoff vis-a-vis other ages. We document a clear bunching response in the form of a spike in job separations at the age cutoff. About 8% separate in response to the elimination of EPL. We find no evidence for wage concessions. Heterogeneity cuts show that excess separations are concentrated among long-tenured workers and firms subject to “last in, first out'' rules, as well as workers that were recently sick (and hence potentially unproductive). The public sector exhibits a stronger effect, with smaller effects in the private sector. The patterns are consistent with the EPL elimination leading to involuntary retirements, while most workers (92 out of 100) remain employed. Going beyond separations, we also study effects on stayers, documenting additional and considerable earnings and hours declines as workers lose EPL. Finally, we study provide a cohort-based aggregate equilibrium analysis of the effects of EPL on employment and earnings per capita, and exploit a reform-based shift in the EPL cutoff age. Overall, our comprehensive analysis implies that EPL can provide a moderate boost to the working life at older ages. Click here to view the paper. Click here to view the CV.
		PRESENTER Benjamin Schoefer University of California, Berkeley
		RESEARCH FIELDS Economic Fluctuations and Growth Labor Studies Monetary Economics Public Economics
		DATE: 18 August 2023 (Friday)
		TIME: 4pm - 5.30pm
		VENUE: Meeting Room 5.1, Level 5 School of Economics Singapore Management University 90 Stamford Road Singapore 178903

© Copyright 2024 by Singapore Management University. All Rights Reserved.