This paper provides a critical assessment of the OECD's Employment Protection Legislation (EPL). This indicator is designed to measure and compare employment protection legislation across countries and has dominated much of recent labour market policy making in the EU.
The authors of this paper demonstrate that the construction of this instrument involves simplifications, estimations and omissions that make it highly suspect as an indicator of employees' protection. Empirical tests do not confirm the predicted negative effects of laws to protect employment. EU policy documents tacitly acknowledged this, but continue to give policy recommendations based on unproven claims.
The paper also asks whether this instrument can be improved or should be abolished and what could be more useful alternatives.