RT Journal Article
SR Electronic
T1 The effect of employment protection on firms’ worker selection
JF Journal of Human Resources
JO J Hum Resour
FD University of Wisconsin Press
SP 0919-10433R1
DO 10.3368/jhr.0919-10433R1
A1 Butschek, Sebastian
A1 Sauermann, Jan
YR 2022
UL http://jhr.uwpress.org/content/early/2022/05/02/jhr.0919-10433R1.abstract
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.