Employment protection, employment and unemployment rates in European Union countries during the Great Recession

ABSTRACT This paper analyses the impact of employment protection legislation on the evolution of employment and unemployment in European Union economies during the Great Recession. The results show that employment protection did not have a significant impact on employment growth. Regarding unemployment rates, we obtain contrasting results: high employment protection for temporary workers was associated with larger increases in unemployment rates, whereas high protection for permanent workers against individual dismissal was associated with lower increases in unemployment rates. Nonetheless, employment protection for permanent in conjunction with that for temporary workers had a positive impact on unemployment rates.