Campus Units

Economics

Document Type

Article

Publication Version

Published Version

Publication Date

2014

Journal or Book Title

IZA Journal of Labor & Development

Volume

3

First Page or Article ID Number

1

Last Page

20

DOI

10.1186/s40175-014-0023-1

Abstract

Sri Lanka’s Termination of Employment of Workmen Act (TEWA) requires that firms with 15 or more workers justify layoffs and provide generous severance pay to displaced workers, with smaller firms being exempted. Although formally subject to TEWA, firms in Export Promotion Zones (EPZs) do not face the same constraints as nonEPZ firms due to size incentives and lax labor law enforcement in that sector. In EPZ, 77% of firms have more than 15 employees while 76% of nonEPZ firms are smaller than 15 employees. Panel data on all formal sector firms between 1995 and 2003 shows that 80% of the size gap is from sorting of large firms into the EPZ. In addition, EPZ firms grow faster and are less likely to die than comparably sized nonEPZ firms. Despite its intent, TEWA lowered employment.

JEL Classification

J30

Comments

This article is from IZA Journal of Labor & Development 3 (2014): 1, doi: 10.1186/s40175-014-0023-1. Posted with permission.

Rights

This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly credited.

Copyright Owner

Abidoye et al

Language

en

File Format

application/pdf

Working Paper

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