Labor Law Enforcement : Dismissal and Incentives

The Employment Protection Legislation (EPL) has been at the heart of many analyses with regard to its macroeconomic impact on the labor market outcomes. However, some more recent literature studies the effects of the EPL, specially concerning the individual dismissal, on the behavior of economic agents involved in a labor relationship. These analyses show that the legal rules applying to the breach of such a relationship are not neutral. Indeed, they influence not only the behavior of parties at the time of the breach (e.g. concerning the choice of the type of dismissal or the bargaining over the severance pay) but also during the work relationship (especially in terms of specific investments incentives). In this respect, any legislative policy should take into account this reactive tendency of economic actors in order to make legal rules related to dismissal more efficient