Employment Protection Legislation (EPL) refers to a variety of measures established by law, court rulings or collective agreements that limit the ability of employers to fire their employees. For example, employers might be required to provide advance notice, a severance payment, or to negotiate the conditions of the dismissal with the worker’s representative. In some countries EPL imposes limits on the reasons why a worker can be legally fired and workers who feel they have been unjustly fired can appeal.
Here, we discuss the effects of EPL on labour market outcomes. We focus on the effects on the overall efficiency of the labour market, as well as on which categories of workers benefit from, or are hurt by, these policies. We begin with a summary of the theoretical predictions on the effects of EPL on labour market outcomes and then summarise the available empirical evidence.
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