Employment Protection Legislation, Labour Market Dualism, and Fertility in Europe.

Abstract

Theoretically, whether a more loosely regulated labour market inhibits or fosters fertility in a society is ambiguous. Empirically, the few studies analysing the relationship between the strictness of employment protection legislation-the norms and procedures regulating labour markets' hiring and firing processes-and fertility have found mixed evidence. This paper reconciles the ambivalent conclusions of previous studies by analysing the impact of employment protection legislation and labour market dualism on total fertility across 19 European countries between 1990 and 2019. Our results indicate that an increase in employment protection for regular workers positively affects total fertility. Nonetheless, an increasing gap between the regulation of regular and temporary employment-that is, labour market dualism-negatively impacts total fertility. These effects, of small-to-moderate intensity, are relatively homogeneous across age groups and geographical areas and are especially pronounced among the lower educated. We conclude that labour market dualism, rather than a "rigid" employment protection legislation, discourages fertility.