Stricter employment protection and firms' incentives to sponsor training: The case of French older workers

Abstract

This paper uses a difference-in-differences approach, combined with propensity score matching, to identify the effect of older workers employment protection on French firms' incentives to sponsor training. Between 1987 and 2008, French firms laying off workers aged over 50 had to pay a tax to the unemployment insurance system, known as the Delalande tax. In 1999, the measure was subjected to a reform that increased the tax, but only for large firms. We find that this exogenous increase substantially raised firms' incentives to train workers aged 45–49 but had no impact on the training rates among workers aged over 50. From a simple model with endogenous firing and training decisions, we give a theoretical illustration of these results.