Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1255: Does Job Security Hamper Employment Prospects?

Carl Magnus Bjuggren () and Per Skedinger ()
Additional contact information
Carl Magnus Bjuggren: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Per Skedinger: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden

Abstract: We investigate the effect of employment protection legislation (EPL) on the propensity to hire workers from unemployment and active labor market programs (ALMPs), utilizing a reform that decreased dismissal costs for small firms only. Using administrative data from Sweden, we find that less stringent EPL increased the share of workers hired from unemployment and some ALMPs. Our results suggest that there was less screening of new hires after the reform, and that liberalization of EPL mitigates the stigma associated with unemployment and participation in ALMPs.

Keywords: Employment protection; Active labor market programs; Unemployment

JEL-codes: H80; J60; J64; K31

Language: English

35 pages, December 6, 2018

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