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  3. American Economic Journal: Macroeconomics
  4. January 2024
  5. The Impact of Extending Employment Protection to Agency Workers on Firms

American Economic Journal:
Macroeconomics

ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)

The Impact of Extending Employment Protection to Agency Workers on Firms

  • Alejandro Micco
  • Pablo Muñoz
American Economic Journal: Macroeconomics
vol. 16, no. 1, January 2024
(pp. 66–101)
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Abstract

We study the impact of a reform that extended employment protection to temporary agency workers. Using a difference-in-difference research design, we show that plants more exposed to the regulation experienced a decrease in revenues and total employment, and that the latter effect was attenuated in industries with high elasticity of substitution between agency and nonagency workers. We also find that labor misallocation increased as a consequence of the regulation. A model of labor demand in the presence of agency work rationalizes these results.

Citation

Micco, Alejandro, and Pablo Muñoz. 2024. "The Impact of Extending Employment Protection to Agency Workers on Firms." American Economic Journal: Macroeconomics, 16 (1): 66–101. DOI: 10.1257/mac.20210249

Additional Materials

JEL Classification

  • J22 Time Allocation and Labor Supply
  • J23 Labor Demand
  • J31 Wage Level and Structure; Wage Differentials
  • K31 Labor Law
  • L60 Industry Studies: Manufacturing: General
  • M51 Personnel Economics: Firm Employment Decisions; Promotions
  • O15 Economic Development: Human Resources; Human Development; Income Distribution; Migration
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