Setting It Right: Employment Protection, Labour Reallocation and Productivity

Abstract

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Local Competitiveness Fostered through Local Institutions for Entrepreneurship

“…The excess job reallocation rate-the amount of job churning over and above the minimum required to accommodate the net employment change-equals 32 percent. Extensive churning is a pervasive trait of all OECD economies (Martin and Scarpetta 2012). 80 percent or more of the reallocation of workers takes place within narrowly defined sectors of the economy in developed countries (Caballero 2007).…”

A vibrant European labor market with full employment

“…Special attention is often given to differences in employment protection for temporary contracts and for permanent workers. Martin and Scarpetta (2012) provide a critical review of the recent empirical evidence on the links between regulations affecting the hiring and firing of workers, labor reallocation and productivity growth: "The upshot is that employment protection impacts significantly on labor market flows and these flows, in turn, have significant impacts on productivity growth." (p.20) The OECD (2009, p.121) finds that an average of about 3% of jobs are destroyed in some industries each year, while an equal number of jobs are created in others.…”

Boosting the Development of Efficient SMEs in the Netherlands

“…Lighter EPL increases labour turnover and helps to reallocate labour resources towards more productive uses, both from less efficient to more efficient existing firms and by facilitating creative destruction with the exit of unproductive firms and the entry of new ones (Martin and Scarpetta, 2012;OECD, 2009a. The net entry of firms in the manufacturing sector accounts for about a fourth of total labour productivity growth in the Netherlands (Martin and Scarpetta, 2012), though firm entry and exit generates a low job reallocation (OECD, 2009a).…”

“…Lighter EPL increases labour turnover and helps to reallocate labour resources towards more productive uses, both from less efficient to more efficient existing firms and by facilitating creative destruction with the exit of unproductive firms and the entry of new ones (Martin and Scarpetta, 2012;OECD, 2009a. The net entry of firms in the manufacturing sector accounts for about a fourth of total labour productivity growth in the Netherlands (Martin and Scarpetta, 2012), though firm entry and exit generates a low job reallocation (OECD, 2009a). More generally, greater labour mobility supports productivity and growth performances notably by permitting a quicker adaptation to changes in technology or consumer demand, in particular if it is achieved through an easier use of permanent contracts (Bassanini et al, 2009).…”