Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/232610 
Year of Publication: 
2020
Series/Report no.: 
IZA Discussion Papers No. 13858
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We investigate the labor market effects of the reestablishment of private-sector workers' right to reinstatement for unfair dismissals, which occurred in 2002 in Peru. Using data from Peruvian Household Surveys from 2004 to 2015, and the Specialized Employment Survey 1998-2001, we estimate a quasi-experimental difference-in-difference model. We find that this reestablishment is associated with increases in new contracting in the private sector, by 5.9 % for permanent hiring and 3.0 % for temporary hiring. By means of placebo tests, we only fund a causal effect of the reinstatement on temporary hiring, not on permanent hiring. We also find a negative association between reinstatements and real wages of 3.9 %, but placebo tests indicate that this is not a causal effect. Our findings call into question the effectiveness of removing reinstatement laws as a policy to increase permanent hiring and wages.
Subjects: 
labor costs
employment
fixed-term contracts
JEL: 
J23
J65
E24
Document Type: 
Working Paper

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