The paper contains a review of the main theoretical models and cross-country empirical results concerning the impact of employment protection legislation on employment and unemployment. It is widely accepted that strict employment protection (i.e. constraints on hiring and firing) is responsible for labour market inflexibility and high and persistent unemployment in European countries in comparison with the USA. At the same time there is no theoretical or robust empirical evidence that employment protection directly influence unemployment, although there are much more findings that it decreases employment-to-population ratio in developed countries. One of the possible reasons for these inconsistent results is shortcomings of cross-country analysis which should be taken into account in political recommendations.