Employment Protection and Labour Mobility in Europe: an empirical analysis using the EU's labour force survey

Does dismissal protection stabilise employment contracts? This study analyses whether the different dismissal laws in the EU countries have an impact on employment stablitiy or, to put it the other way around, whether worker mobility is higher in less regulated labour markets. The paper first discusses the national dismissal laws and some methodological issues and then presents an econometric anaylsis of data from the EU's labour force survey. The study concludes that national regulations have an impact on employment stability but that industry-specific variables and the macroeconomic situaion are also important.     

SHORT-TERM CONTRACTS REGULATIONS AND DYNAMIC LABOUR DEMAND: THEORY AND EVIDENCE

We present a dynamic labour demand model where we evaluate the impact of employment regulations on permanent and temporary employment. We consider three different kinds of regulations, namely firing costs, hiring costs and a constraint on temporary contracts. These regulations differently affect the size and composition of employment. The theoretical results are interpreted and questioned on the basis of empirical evidence on the employment effects of the regulation reforms that occurred in the major European countries in the period 1983–1999. The empirical analysis is based on a new set of time‐varying indicators on permanent employment protection, fixed‐term contracts and temporary agency work regulations. We find evidence in support of the hypothesis that fixed‐term contracts have been effective stepping‐stones to permanent jobs during the period under observation. On the contrary, flexible temporary agency work regulations seem to induce a substitution of permanent with temporary contracts.     

Efficiency and equity impacts of rural land rental restrictions: Evidence from India

Recognition of the potentially deleterious implications of inequality in opportunity originating in a skewed asset distribution has spawned considerable interest in land reforms. However, little attention has been devoted to the fact that, in the longer-term, the measures used to implement land reforms, especially rental restrictions, could negatively affect productivity. Use of state level data on rental restrictions, together with a nationally representative survey from India suggests that, contrary to original intentions, rental restrictions negatively affect productivity and equity by reducing scope for efficiency-enhancing rental transactions that benefit poor producers. Simulations suggest that, by doubling the number of producers with access to land through rental, from about 15 million currently, liberalization of rental markets could have far-reaching impacts.     

Informality in an economy with active labour courts

Job regulations and the justice branch interfere on several aspects of labour contracts. We build a model which explores the role of labour courts on the wage distribution in both formal and informal sectors. We obtain that the presence of active labour courts produces a negative relation between the wage gap and the productivity of the worker, a regularity documented in the empirical literature. Active labour courts also reduce informality of unskilled workers but do not have an impact on informality of skilled workers. Some elements and implications of our model are tested using Brazilian data.     

Investment climate and firm productivity: an application to Vietnamese manufacturing firms

The fundamental aspect of a national competitive advantage is a good investment climate. Understanding the role of the investment climate in generating firm productivity has received extensive attention by policymakers and economists in many countries. The article studies the effect of different dimensions of the investment climate on firm productivity. Using a large dataset of Vietnamese manufacturing firms, the article finds that deficiencies in the investment climate are prejudicial to firm productivity and competition. Furthermore, in examining the effect of corruption in association with the quality of the business environment, the study also investigates the possibility that corruption may compensate firms for a bad investment climate or at least may neutralize the negative impact of inefficient government regulations. In other words, corruption acts as ‘speed money’ to improve the efficacy of the provision of public services or provides leeway for entrepreneurs to bypass the inefficient regulations. This situation, however, is extremely harmful to the economy in the long run because it distorts the market and erodes the incentives for productive investments. Developing countries therefore need to put much more effort into institutional reforms, especially fighting corruption and efficiency in the provision of public goods and services.     

An analysis of the length of labour and financial contracts: a study for Spain

This study investigates the connection between the duration of financial contracts and that of labour contracts. Workers with long–term contracts have incentives to invest in training. This makes them attractive to the entrepreneur. Furthermore, this behaviour will be reinforced if financial contracts are long–term, because it reduces the probability of an early liquidation as well as the dismissal of trained workers. As a conclusion, significant increases in the length of financing contracts should be accompanied by corresponding increases in the length of labour contracts. Support for this theoretical contention is found by testing it on a dataset composed of Spanish manufacturing firms for the period 1991–2000.     

国外单方解雇权的规制及对我国的启示

对雇主单方解雇权的规制因解雇自由曾长期倍受推崇而遭到各国立法与理论的漠视。随着时代的发展,为保护广大劳动者的合法权利,各国立法逐渐重视对雇主单方解雇权的规制,也因此形成了各自的立法模式。就我国现行法相关规定而言,对用人单位单方解除劳动合同的规制也存在一些问题,因此探析我国现行法规定的缺陷,借鉴国外先进立法经验予以完善则显得尤为必要。     

Productivity change of Portuguese municipalities after local reforms

This article examines the impact of the reforms introduced in the structure of the Portuguese local administration after the bailout agreement in 2011 on the efficiency and productivity of municipalities. In order to determine a measure of productivity change, we apply the global Malmquist productivity index to assess the performance of the 278 Portuguese mainland municipalities for the recent 6-year period 2009–2014. The overall results reveal that there was a decrease in the global productivity until 2013 followed by a notable increase in 2014 basically due to technological changes, thus it seems that the reforms have had a positive effect on the productivity of municipalities.     

The effects of employment protection: Learning from variable enforcement

Employment protection legislation (EPL) is not enforced uniformly across the board. There are a number of exemptions to the coverage of these provisions: firms below a given threshold scale and workers with temporary contracts are not subject to the most restrictive provisions. This within-country variation in enforcement allows us to make inferences on the impact of EPL which go beyond the usual cross-country approach. In this paper we develop a simple model which explains why these exemptions are in place to start with. Then we empirically assess the effects of EPL on dismissal probabilities and on the equilibrium size distribution of firms. Our results are in line with the predictions of the theoretical model. Workers under permanent contracts in firms with less restrictive EPL are more likely to be dismissed. However, there is no effect of the exemption threshold on the growth of firms.     

Incentive contracts and bank performance

This paper, using unique survey data from the banking industry in rural China, investigates the effect of incentive contracts on performance. In the context of China's economic transition, we find that the incentive contracts have a positive effect on the bank manager's performance in deposit taking and non‐performing loan reduction. This finding is robust when we control for the endogeneity of incentive contracts. Our empirical results present evidence on the positive effects of incentive‐based banking reforms in rural China.     

WATER SUBSIDIES, WATER TRANSFERS, AND ECONOMIC EFFICIENCY

Water pricing subsidies and restrictions on water transfers are integral features of federal water supply policies in the western United States. Critics claim that these features discourage efficient use of water. However, current analyses ignore an important feature of federal water supply contracts: entitlement ceilings. This paper analyzes the implications of entitlement ceilings for federal water policies and several proposals for policy reform, including eliminating transfer restrictions, reducing pricing subsidies, and imposing groundwater pump taxes. Analysts may overstate both the efficiency losses resulting from Bureau policies and the amount of water that would be freed up from agriculture if the proposed policy reforms were instituted.     

The effects of human resource management on small firms’ productivity and employees’ wages

This paper analyses whether employees and firms differently benefit from particular human resource (HR) practices. The focus is on small firms that may be badly informed on the impact of HR practices on firm performance. In this study on Dutch pharmacies, it is found that firms do not reward employees’ skills according to their contribution to firms’ productivity, as (1) employees are over-rewarded for their sector-specific skills and under-rewarded for the productivity enhancing effect of their computer skills and (2) employees’ work experience positively affects their wages but does not have real productivity effects. Moreover, it is found that training employees in case of vacancy problems seems to be an adequate HR practice, since it increases productivity without affecting the average wage level. The opposite holds for offering higher wages to newly recruited employees. Furthermore, we find that only the employees benefit from performance evaluation interviews, whereas employing many employees by temporary contracts appears to have a negative effect on productivity, without affecting the wage level.     

Age dependency and labour productivity divergence

This study finds strong empirical evidence in favour of the hypothesis that the age composition of population matters for labour productivity growth. We applied the fixed effects panel model using data on a large number of countries over the period 1980–2010. Our results suggest that higher age dependency not only directly impacts negatively on labour productivity but also modifies the impact of other determinants of labour productivity. Child dependency has a more adverse effect on labour productivity than old age dependency. We specifically find that the marginal effects of gross capital formation, information and communication improvement, and labour market reforms are significant at lower levels of age dependency. However, the marginal effect of savings on labour productivity is high at a high level of age dependency. The impact of age dependency varies between developed and developing economies. Diversity in the size and nature of age dependency across regions and different income groups help to explain the labour productivity differential across them.     

Occupational self-selection in a labor market with moral hazard

This paper studies the determinants and implications of self-selection when firms imperfectly observe worker effort. The effects of the resulting moral hazard problem on the self-selection mechanism are analyzed in a model in which workers simultaneously choose an employment sector and an effort level. The implications of the model reveal that in the presence of moral hazard, workers’ effort decisions become an additional mechanism determining the pattern of selection into sectors. Workers’ sector-specific endowments impact sectoral allocation through their effect on workers’ comparative advantage as well as their effect on workers’ shirking propensity. The model is then used in an empirical application that analyzes workers’ self-selection into white collar and blue collar occupations. The estimation results, based on data from the National Longitudinal Survey of Youth, suggest that workers’ occupational self-selection leads to higher wages and lower dismissal rates in both occupations, compared to an economy in which workers are randomly assigned to each occupation. The difference in dismissal rates between the two occupations is driven by the higher expected productivity in the white collar sector. The positive effects of occupational sorting diminish as the labor market becomes increasingly characterized by moral hazard. Results also suggest that human capital investments in skills that are most relevant to blue collar jobs may generate higher wages and lower dismissal rates in both white collar and blue collar occupations.     

Productivity change in Egyptian public sector industries after ‘the opening’, 1973–1979

Policy reforms to accelerate growth and improve production efficiency have been undertaken in Egypt since 1973. This paper evaluates the impact of these reforms on Egypt's public sector firms in terms of their productivity performance. We find an important asymmetry in the consequences of the reforms between the rapidly expanding import substitution sector with high productivity growth and the stagnant traditional export sector. Our results also indicate that much of the observed productivity growth of the import substitution sector may be ascribed to improvements in capacity utilization, and suggests that Egypt's industrial policies be reassessed since such a path may not be sustainable.     

Trade and product market policies in upstream sectors and productivity in downstream sectors: Firm-level evidence from China

This paper explores the heterogeneous productivity impact of trade, product market and financial market policies over the last decade in China. The paper makes a critical distinction between downstream and upstream industries, focusing on the indirect effects of regulation in upstream industries on firm performance in downstream manufacturing industries. We identify the differential effect of these policies on firm productivity growth depending on how far incumbents are relative to the technological frontier. Trade and product market reforms are found to deliver stronger gains for firms that are closer to the industry-level technological frontier, while the reverse holds for financial market reforms. The key conclusion that can be derived from the empirical analysis is that further product, trade and financial market reforms would bring substantial gains in China and could therefore speed up the convergence process. Taken at face value, the empirical estimates would imply that aligning product, trade and financial market regulation to the average level observed in OECD countries would bring aggregate manufacturing productivity gains of respectively 9%, 3% and 6.5% after 5 years.     

Job protection,housing market regulation,and the youth

Young Europeans experience high unemployment rates, job instability, and late emancipation. Meanwhile, they do not support reforms weakening protection on long‐term contracts. In this paper, we suggest a possible rationale for such reform distaste. When the rental market is strongly regulated, landlords screen applicants with regard to their ability to pay the rent. Protecting regular jobs offers a second‐best technology to sort workers, thereby increasing the rental market size. We provide a model where nonemployed workers demand protected jobs despite unemployment and the share of short‐term jobs increases, whereas the individual risk of dismissal is unaffected. Our theory can be extended to alternative risks and markets involving correlated risks and commitment under imperfect information.     

Do data policy restrictions impact the productivity performance of firms and industries?

This paper examines how policies regulating the cross‐border movement and domestic use of electronic data on the internet impact the productivity of firms in sectors relying on electronic data. In doing so, we collect regulatory information on a group of developed economies and create an index that measures the regulatory restrictiveness of each country's data policies. The index is based on observable policy measures that explicitly inhibit the cross‐border movement and domestic use of data. Using cross‐country firm‐level and industry‐level data, we analyse econometrically the extent to which these data regulations over time impact the productivity performance of downstream firms and industries, respectively. We show that stricter data policies have a negative and significant impact on the performance of downstream firms in sectors reliant on electronic data. This adverse effect is stronger for countries with strong technology networks, for servicified firms, and holds for several robustness checks.     

Product Market Reform and Innovation in the EU*

European Union countries have implemented widespread reforms to product markets to stimulate competition, innovation, and economic growth. We provide empirical evidence that the reforms carried out under the EU Single Market Programme (SMP) were associated with increased product market competition, as measured by a reduction in average profitability, and with a subsequent increase in innovation intensity and productivity growth for manufacturing sectors. Our analysis exploits exogenous variation in the expected impact of the SMP across countries and industries to identify the effects of reforms on average profitability, and the effects of profitability on innovation and productivity growth.     

De jure and de facto determinants of power: evidence from Mississippi

We evaluate the empirical effectiveness of de facto versus de jure determinants of political power in the U.S. South between the end of the nineteenth and the beginning of the twentieth century. Using previously-unexploited racially-disaggregated data on voter registration in Mississippi for the years 1896 and 1899, we show that the observed pattern of black political participation is driven by de facto disfranchisement as captured by the presence of a black political majority, which negatively affects black registration. The de jure provisions introduced with the 1890 state constitution and involving literacy tests and poll taxes exert a non-robust impact. Furthermore, a difference-in-differences approach shows that the decline in aggregate turnout pre-dates the introduction of de jure restrictions and confirms a causal effect of the presence of a black political majority. De jure restrictions intensify the influence of the latter after 1890, which suggests that the main effect of the constitutional reforms may have been an institutionalization of de facto disfranchisement.