Where Are You? Targeting Marginal Workers and Partial Employment Protection Reform: Evidence from Spain

Publikation: Working paperForskning

  • Ferran Elias Moreno
Most employment protection (EP) reforms are partial. They aim to introduce flexibility at the margin by targeting new hires and placing restrictions on which firms can hire with lower levels of EP. However, it is not clear what the right way to target jobs at the margin is. We exploit a unique quasi-experiment in Spain that decreased employment protection of new permanent hires who were younger than 31 between 2001 and 2006. Only firms with very low employment volatility could hire with lower levels of EP. Using an administrative dataset, we show that the reform had no effect on hirings, lay-offs, quits, contract length, starting wages and post-entry wages. We compare the results for the policy in 2001-2006 with a similar policy in 1999-2000 but, that instead of restricting which firms could benefit from it, targeted only workers who had not been in a permanent contract for a certain time. The 1999-2000 policy had significant effects on hiring. Overall, the evidence suggests that restrictions on which workers can benefit from the policy are better at targeting marginal jobs than constraints that exclude firms with high levels of employment volatility.
StatusUdgivet - 2015

ID: 146201547