Seniority rules, worker mobility and wages: Evidence from multi-country linked employer-employee data

Böckerman, Petri and Skedinger, Per and Uusitalo, Roope (2015): Seniority rules, worker mobility and wages: Evidence from multi-country linked employer-employee data.

Abstract

We construct a multi-country employer-employee data to examine the consequences of employment protection. We identify the effects by comparing worker exit rates between units of the same firm that operate in two countries that have different seniority rules. The results show that last-in-first-out rules reduce dismissals of older, more senior workers, especially in shrinking multinational firms, and increase their bargaining power, resulting in a steeper seniority-wage profile.

• Item Type: MPRA Paper
• Language: English
• Keywords: Multi-country linked employer-employee data, Employment protection legislation, Seniority rules
• Subjects: J - Labor and Demographic Economics > J0 - General > J08 - Labor Economics Policies; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J63 - Turnover ; Vacancies ; Layoffs; K - Law and Economics > K3 - Other Substantive Areas of Law > K31 - Labor Law; K - Law and Economics > K3 - Other Substantive Areas of Law > K32 - Environmental, Health, and Safety Law; L - Industrial Organization > L5 - Regulation and Industrial Policy > L50 - General

References

Autor, D.H., Kerr, W.R. and Kugler, A.D. (2007), Does employment protection reduce productivity? Evidence from U.S. states, Economic Journal 117, F189-F217.

von Below, D. and Skogman Thoursie, P. (2010), Last-in first-out? Estimating the effect of seniority rules in Sweden, Labour Economics 17, 987-997.

Bergström, O. (2011), Regler vid driftsinskränkningar i viktiga konkurrentländer, in Rudeberg, S. and Hedlund, H., Faktiska konsekvenser av turordningsregler i LAS och kollektivavtal, Confederation of Swedish Enterprise and the Swedish Federation of Salaried Employees in Industry and Services, Stockholm.

Boeri, T. and Jimeno, J.F. (2005), The effects of employment protection: Learning from variable enforcement, European Economic Review 49, 2057-2077.

Boeri, T. and Van Ours, J. (2013), The Economics of Imperfect Labor Markets. Princeton: Princeton University Press.

Buhai, I.S., Portela, M.A., Teulings, C.N. and van Vuuren, A. (2014), Returns to tenure or seniority?, Econometrica 82, 705-730.

Burgess, S., Knetter, M. and Michelacci, C. (2000), Employment and output adjustment in the OECD: A disaggregate analysis of the role of job security provisions, Economica 67, 419–435.

Centeno, M. and Novo, A.A. (2014), Paying for others' protection: Causal evidence on wages in a two-tier system, Discussion Paper No 8702, IZA, Bonn.

Confederation of Swedish Enterprise (2012), Slutsatser ur de partsgemensamma rapporterna om faktiska konsekvenser av LAS turordningsregler, Confederation of Swedish Enterprise, Stockholm.

Haltiwanger, J., Scarpetta, S. and Schweiger, H. (2006), Assessing job flows across countries: The role of industry, firm size and regulations, Discussion Paper 2450, IZA, Bonn.

Jovanovic, B. (1979), Job matching and the theory of turnover, Journal of Political Economy 87, 972-990.

Kahn, L.M. (2007), The impact of employment protection mandates on demographic temporary employment patterns: International microeconomic evidence, Economic Journal 117, F333-356.

Kugler, A.D. (2004), The effect of job security regulations on labor market flexibility: Evidence from the Colombian labor market reform, in Heckman, J. and Pagés, C. (eds.), Law and employment: Lessons from Latin America and the Caribbean, NBER Conference Report series. Chicago and London: University of Chicago Press.

Kugler, A. and Pica, G. (2008), Effects of employment protection on worker and job flows: Evidence from the 1990 Italian reform, Labour Economics 15, 78-95.

Lafontaine, F. and Sivadasan, J. (2009), Do labor market rigidities have microeconomic effects? Evidence from within the firm, American Economic Journal: Applied Economics 1, 88-127.

Larsson, H., Larsson, S., Oscarsson, E. and Maier Söderberg, L. (2013), LAS i förändring – ett kunskapsunderlag om anställningsskydd, kompetens och omställning. Stockholm: Swedish Confederation of Professional Associations.

Lazear, E.P. (1979), Why is there mandatory retirement? Journal of Political Economy 87, 1261-1284.

Lazear, E. (1990), Job security provisions and employment, Quarterly Journal of Economics 105, 699-726.

Leonardi, M. and Pica, G. (2013), Who pays for it? The heterogeneous wage effects of employment protection legislation. Economic Journal 123, 1236-1278.

Lindbeck, A. and Snower, D.J. (2001), Insiders versus outsiders. Journal of Economic Perspectives 15, 165-188.

Martins, P. (2009), Dismissals for cause: The difference that just eight paragraphs can make, Journal of Labor Economics 27, 257-279.

Messina, J. and Vallanti, G. (2007), Job flow dynamics and firing restrictions: Evidence from Europe, Economic Journal 117, F279-F301.

Nickell, S. and Layard, R. (1999), Labor market institutions and economic performance, in Ashenfelter, O. and Card, D. (eds.), Handbook of labor cconomics, Volume 3, Amsterdam: Elsevier Science, North Holland.

OECD (2013), Education at a Glance, Paris, OECD.

Skedinger, P. (2010a), Employment Protection Legislation: Evolution, Effects, Winners and Losers. Edward Elgar Publishing.

Skedinger, P. (2010b), Sweden: A minimum wage model in need of modification, in Vaughan-Whitehead, D. (ed.), The minimum wage revisited in the enlarged EU, Edward Elgar, Cheltenham, UK, and Northampton, MA, US, and ILO, Geneva.

Tuominen, E. (2013), Flexible retirement age in Finland. The evaluation of the Finnish flexible retirement scheme in light of employer and employee surveys. Working Paper No. 03/2013, Finnish Centre for Pensions,.

van der Wiel, K. (2010), Better protected, better paid: Evidence on how employment protection affects wages, Labour Economics 17, 16-26.

World Bank (2015), Doing business 2016, Washington D.C.