The Effect of High Dismissal Protection on Bureaucratic Turnover and Productivity

Abstract

This paper studies the impact of high dismissal protection on bureaucratic turnover and productivity in Chile. For identification, we use a one-off event that granted a permanent contract to temporary teachers with a minimum seniority by a specific date and implement a difference-in-differences strategy. We find that high dismissal protection reduces turnover by 25 percent in the first two years. The reduction is statistically significant among teachers both at the bottom and top of the distribution of baseline performance. We then examine the impact on teacher productivity and find a significant decline in the learning of students taught by teachers with low baseline performance.