Employment protection legislation and firm profitability

This study examines the effect of employment protection legislation (EPL) on firm performance. Using a panel dataset of 12,773 Belgian small and medium-sized firms between 2000 and 2009,we compute several company-specific measures of a firm’s exposure to EPL. The empirical results show that firms are more profitable when they are faced with less hiring and firing costs by employing relatively more blue-collar workers than their industry peers. Firms that attempt to be more flexible by hiring more temporary workers, however, do not significantly outperform their competitors.status: publishe