Theory predicts that an increase in employment protection may reduce employment levels by acting as a tax on firms by constraining hiring and firing decisions. We use a unique administrative database of the country’s dispute resolution body – the Commission for Conciliation, Mediation and Arbitration (CCMA) – to create a nuanced and empirically based measure of employment protection for the labour market in South Africa. Drawing on district-level labour force data, we evaluate the empirical link between industrial disputes, a function of quantity and efficiency parameters of the CCMA, and employment levels in the domestic labour market. We assume a positive relationship between the number of industrial disputes and the level of employment protection in the labour market. We utilise an augmented Lazear model, where a two-stage, endogeneity-corrected, least-square model is used to predict the impact of differentially measured indices of industrial disputes on time
and regional variation in employment levels in South Africa. Our estimates suggest that an increase in industrial disputes, measured both in the number of industrial dispute cases brought to the CCMA and in the efficiency levels of this body, decreases regional-level employment in the South African labour market.