Better Protected, Better Paid: Evidence on How Employment Protection Affects Wages

No 4465, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper empirically establishes the effect of the employer's term of notice on the wage level of employees. The term of notice is defined as the period an employer has to notify workers in advance of their upcoming dismissal. The wages paid during this period are an important element of firing costs and hence employment protection. To find a causal effect, I exploit the exogenous change in the term of notice that resulted from the introduction of a new Dutch law in 1999. Strong evidence is found that a longer 'dormant' term of notice leads to higher wages. In my sample, an additional month of notice increases wages by three percent, ceteris paribus.

Keywords: term of notice; employment protection; wages (search for similar items in EconPapers)
JEL-codes: C23 J31 J38 J63 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2009-10
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published - published in: Labour Economics, 2010, 17 (1), 16-26

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Related works:
Journal Article: Better protected, better paid: Evidence on how employment protection affects wages (2010)
Working Paper: Better Protected, Better Paid: Evidence on How Employment Protection Affects Wages (2008)
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