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This paper studies the effect of employment protection on worker productivity and firm output in the context of a public school system. In 2004, the Chicago Public Schools (CPS) and Chicago Teachers Union (CTU) signed a new collective bargaining agreement that gave principals the flexibility to dismiss probationary teachers (defined as those with less than five years of experience) for any reason, and without the elaborate documentation and hearing process typical in many large, urban school districts. Results suggest that the policy reduced annual teacher absences by roughly 10 percent and reduced the prevalence of teachers with 15 or more annual absences by 20 percent. The effects were strongest among teachers in elementary schools and in low-achieving, predominantly African-American high schools, and among teachers with highpredicted absences. There is also evidence that the impact of the policy increased substantially after its first year.

The Effect of Employment Protection on Worker Effort: Evidence from Public Schooling