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IZA Discussion Paper No. 9148
June 2015
Dismissal Disputes and Endogenous Sorting

Dismissal disputes occur mostly in recessions and often lead to long and costly contract termination procedures. This paper investigates how dispute procedures may affect the job-matching process. First we present a simple accounting frame- work that corresponds with general dismissal legislation, but is sufficiently flexible to accommodate country-specific legislation. Detailed information from a sample of 2,191 disputes that occurred in the Netherlands between 2006 and 2009 is used to adjust the framework to Dutch institutional specificity. The resulting equilibrium matching model is solved to explain endogenous sorting between lengthy and costly firing procedures. The model also rationalizes the longevity of the dual Dutch model and its political resilience.

Communications
Mark Fallak
mark.fallak@liser.lu
+352 585-855-526
World of Labour
Olga Nottmeyer
olga.nottmeyer@liser.lu
+352 585-855-501
Network Coordination
Christina Gathmann
christina.gathmann@liser.lu

The IZA@LISER Network is a global community of scholars dedicated to excellence in labor economics and related fields, now coordinated at the Luxembourg Institute of Socio-Economic Research (LISER) following its transition from Bonn.

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