ECON 4009 Labor Economics 2017 Fall By Elliott Fan Economics, NTU Elliott Fan: Labor 2017 Fall Lecture 11

DD Example: Kan and Lin (2011) “The Effects of Employment Protection on Labor Turnover: Empirical Evidence from Taiwan,” Economic Inquiry, 49, 398–433. The paper explored the effect on labor turnovers of the introduction of Labor Standards Law, which has substantially increased the costs of firing. Elliott Fan: Labor 2017 Fall Lecture 11

DD Example: Kan and Lin (2011) Elliott Fan: Labor 2017 Fall Lecture 11

DD Example: Kan and Lin (2011) Taiwan’s LSL attempts to regulate all aspects of employment relationship, for example, labor contract, wage, overtime payments and hours, retirement and severance payments, compensations for occupational accidents, and maternity benefits. Elliott Fan: Labor 2017 Fall Lecture 11

DD Example: Kan and Lin (2011) Some of the LSL labor protection measures were new, for example, the prohibition of firing at will. Firstly, employers have to give an advance notice before dismissing an employee. Secondly, LSL imposes a higher severance pay than previous labor laws. An employer can dismiss an employee only if the business is closing down, suspended for more than 1 month, suffering from a loss, or when the employee is not able to perform the duties satisfactorily or violates the work rule. Elliott Fan: Labor 2017 Fall Lecture 11

DD Example: Kan and Lin (2011) Enforcement The poor enforcement of LSL has also contributed to the low compliance rate of LSL in the early years of its implementations. During the first 3 years of LSL’s enactment the Department of Labor of the Ministry of Interior was in charge of the enforcement of LSL. However, inspection and prosecution were carried out by a multitude of local labor agencies belonging to the Taiwan Provincial Government, the Taipei and Kaohsiung municipalities, and the Ministry of Economic Affairs. Elliott Fan: Labor 2017 Fall Lecture 11

DD Example: Kan and Lin (2011) The industries covered by LSL include: (a) agriculture, forestry, fishing, and animal husbandry; (b) mining and quarrying; (c) manufacturing; (d) electricity, gas, and water; (e) construction; (f) transportation, storage, and communication; and (g) mass media. The industries not covered by LSL belong to the service sector: (a) retail and wholesale; (b) hotels and restaurants; (c) commerce; (d) finance, insurance and real estate; (e) business services; (f) social, personal, and related community services; and (g) public administration. Elliott Fan: Labor 2017 Fall Lecture 11

DD Example: Kan and Lin (2011) Definitions: Rate of hiring: HRATEit = (HIREit /EMPit−1) × 100 Rate of separating: SRATEit = (SEPARATEit /EMPit−1) × 100 Worker flow: WFLOWit = (HIREit + SEPARATEit /EMPit−1) × 100 Job reallocation rate: JREALLOCit = (| EMPit − EMPit−1|/EMPit−1) ×100, = (| JCit − JDit |/EMPit−1) × 100, = (| HIREit − SEPARATEit |/EMPit−1)×100 Elliott Fan: Labor 2017 Fall Lecture 11

Elliott Fan: Labor 2017 Fall Lecture 11

Elliott Fan: Labor 2017 Fall Lecture 11

Elliott Fan: Labor 2017 Fall Lecture 11

DD Example: Kan and Lin (2011) Difference-in-difference First layer: time (three timings) Second layer: being covered by LSL Elliott Fan: Labor 2017 Fall Lecture 11

DD Example: Kan and Lin (2011) Elliott Fan: Labor 2017 Fall Lecture 11