Resumen
This paper develops and tests a mechanism by which job security affects the
age-composition of employment. This mechanism is based on the relative costs
of dismissing young versus older workers resulting from job security provisions
that are related to tenure. Using 39 consecutive annual household-surveys from
Chile, we find that job security is associated with a substantial decline in the
wage employment-to-population rate of young workers. In contrast, we do not
find such a decline in young self-employment rates or in the wage employment
rates of older workers. Comparing results for men and women and using measures
of relative dismissal costs, we find that the adverse effect of job security
on youth employment is driven by the link between severance payments and
tenure. We also find that job security does not have a significant impact on
overall aggregate employment, participation or unemployment rates.