The Impact of Extended Employment Protection Laws on the Demand for Temporary Agency Workers

We study the impact of a reform that increased the regulatory burden on temporary agency work (TAW) in Chile. Using a panel of manufacturing plants, we show that the use of TAW fell immediately after the regulation, with differential effects by plants’ size and volatility. Difference-in-differences estimates suggest that plants using TAW substituted away from agency workers after the regulation, increasing regular work by 9.2%. Despite this substitution effect, total employment decreased by 8.6% in these plants. We report less precise evidence of negative scale effects on output and profits.


Author(s) P. Munoz, A. Micco
Language English
Year of publication Sep, 2019
Publisher Institute for Research on Labor and Employment, Berkeley
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