Dismissal Regulation As a Discipline Device? Evidence from Establishment-level Industrial Actions
Abstract: Using data on a large sample of EU establishments, I analyze the relationship between discharge regulation and industrial actions. I introduce a simple theoretical framework allowing for both positive and negative effects of dismissal constraints on the occurence of labor disputes, and empirically answer the question as whether stricter dismissal laws make EU establishments experience more frequent and intense industrial actions (work-to-rule, strikes and occupation). I find that a change from employment at-will to a regime with very strict dismissal contraints is associated with an increase in the likelihood of observing an industrial action at the establishment-level ranging between 10.5 and 14.8 percentage points, and that this effect reduces to around 6.7 percentage ponits when only company-specific industrial actions are considered. This result is shown to be robust to possible endogeneity. Discharge constraints effects on industrial actions are then confirmed through a difference-in-differences analysis, by exploiting quasi-experimental variations in national dismissal regulations. My findings show that weaker discharge regulations moderate labor conflicts in EU establishments, by disciplining workers and restraining unions' activism.