1. Comment on: OECD Employment Outlook 2004 Giuseppe Dari-Mattiacci Measuring Law December 15 th, 2006

2. Focus of this comment From the OECD Employment Outlook:  Under some conditions EPL can be welfare enhancing  EPL affects the balance between rigidity and flexibility and between long and short term contracts  The effects of EPL are context dependent

3. Remarks 1.Importance of the informal sector and of other regulations 2.Emphasize the contractual nature of employment

4. Importance of the informal sector and of other regulations Idea: Stringent EPL only implies stronger protection for those to whom EPL is applicable This pool can shrink as a result of reforms as employee move to the informal sector or employers find it convenient to frame the contract differently

5. The employee … and its alternatives:  Independent contractor  Trainee OECD  Illegal employee  Legal employee with illegal contract

6. The employee  Interaction with the notion of employment (who is to be considered in the labor force?)  More formal protection might result in less actual protection of employees  Definition of costs and benefits of EPL

7. The employer  Termination of business as a way to terminate employment  Protection outside EPL

8. Emphasize the contractual nature of employment Idea: The employment contract is a contract Both parties can directly benefit from improved commitment devices Emphasize the default of mandatory nature of EPL (relates to earlier point)

9. Direction of causation  EPL could be the effect rather that the cause of labor market structure and performance  Employees in a labor market with high demand require different ways of protection that in a market with low demand  Who is pushing for labor reforms?

10. EPL as a bonding mechanism  The benefit of EPL might accrue to both parties OECD  The employer can make its commitment not to dismiss credible  Job security can be a substitute for higher pay

11. EPL as a bonding mechanism  Improving the ability of the employer to commit might enhance contract flexibility while apparently creating labor market rigidity  Employees protection offered by EPL is not always mandatory in practice  It rather alters the menu of contractual choices for employer and employee

12. Conclusion  Contextualize EPL

13. Thank you