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• W2099960648 abstract "We study the impact of employment protection legislation on the returns to tenure in an environment with imperfect information on the job match quality. Workers can perform either a ‘skilled’ task whose productivity is very sensitive to match quality or an ‘unskilled’ task less risky, whose expected productivity is higher in the no information case. The firm can invest in a costly signal which reveals match quality before hiring or reallocate the worker among tasks according to the information obtained while employed. We show that stricter employment protection increases the cost of forming low quality matches and leads the firm to invest more in the ex ante signal, which in turn lowers internal mobility and the returns to tenure. This result contrasts with the human capital argument which implies a positive relation between strictness of legislation and returns to tenure. The main prediction of the model is tested using US panel data drawn from the NLSY79 and information on the adoption across states from 1980 to 1996 of three common law exceptions to the employment at-will doctrine. We estimate a Mincerian wage equation and find that the ”implied contract exception” significantly decreases the returns to tenure by 10.96 percent, which supports our information acquisition mechanism." @default.
• W2099960648 created "2016-06-24" @default.
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• W2099960648 date "2004-01-01" @default.
• W2099960648 modified "2023-09-27" @default.
• W2099960648 title "Returns to Tenure and Employment Protection Policies in the US" @default.
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