PT  - JOURNAL ARTICLE
AU  - Butschek, Sebastian
AU  - Sauermann, Jan
TI  - The effect of employment protection on firms’ worker selection
AID  - 10.3368/jhr.0919-10433R1
DP  - 2022 May 09
TA  - Journal of Human Resources
PG  - 0919-10433R1
4099  - http://jhr.uwpress.org/content/early/2022/05/02/jhr.0919-10433R1.short
4100  - http://jhr.uwpress.org/content/early/2022/05/02/jhr.0919-10433R1.full
AB  - To estimate the causal effect of employment protection on firms’ worker selection, we study a policy change that reduced dismissal costs for the employers of over a tenth of Sweden’s workforce. Our difference-in-differences analysis of firms’ hiring uses individual ability measures including estimated worker fixed effects, GPA at age 15, and military test scores. We find that the reform reduced minimum hire quality by around 2%. Our results show that firms both decreased their hiring thresholds and hired more workers. We find that firms increasingly hired young, foreign born and long-term non-employed individuals, suggesting potential welfare gains from the reform.