The Effect of Employment Protection on Labor Productivity

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractThe theoretical predictions of how employment protection affects firm productivity are ambiguous. In this paper I study the effect of employment protection rules on labor productivity using micro data on Swedish firms. A reform of the employment protection rules in 2001 made it possible for small firms with less than eleven employees to exempt two workers from the seniority rules. I exploit the reform as a natural experiment. My results indicate that increased labor market flexibility increases labor productivity. The increase appears to be driven mainly by the older and the smallest firms. It is not explained by capital intensity or the educational level of workers.

Employment protection legislation and firm growth: evidence from a natural experiment

“…In addition, the negative e¤ect was largest among establishments with relatively few females or workers with temporary contracts. Bjuggren (2013) investigated how the reform in ‡uenced labor productivity using …rm-level micro data, …nding that the reform increased labor productivity by 2.5 percent for the treatment group relative to the control group of larger …rms. The positive e¤ect of the reform on labor productivity increased to 6 percent when the sample was restricted to …rms that were downsizing and stayed within the treatment and control group during the whole study period.…”

“…Four recent studies have used this approach to investigate how the 2001 reform of the Swedish employment protection legislation a¤ected job ‡ows (von Below and Skogman Thoursie, 2010), labor productivity (Bjuggren, 2013), and work absence (Lindbeck et al, 2006;Olsson, 2009). Studies in other countries have also used natural experiments to investigate how changes in the employment protection legislation have a¤ected job ‡ows (Kugler, 2004;Autor et al, 2007;Bauer et al, 2007;Martins, 2007), employment probabilities for unemployed individuals (Kugler and Saint-Paul, 2004;Nicholson and North, 2004), the overall employment level (Miles, 2000;Autor et al, 2004Autor et al, , 2006Verick, 2004;Schivardi and Torrini, 2008), wages (Friesen, 1996;Leonardi and Pica, 2007;Schivardi and Torrini, 2008), …rm productivity (Autor et al, 2007;Martins, 2007), and work absence (Riphahn, 2004;Engellandt and Riphahn, 2005;Ichino and Riphahn, 2005).…”

Employment Protection Legislation and Firm Growth: Evidence from a Natural Experiment.

“…Four recent studies have used this approach to investigate how the reform a §ected job áows (von Below and Skogman Thoursie, 2010); labor productivity (Bjuggren, 2013); and work absence (Lindbeck et al, 2006;Olsson, 2009). Studies in other countries have also used natural experiments to investigate how changes in employment protection legislation a §ect job áows (Kugler, 2004;Autor et al, 2007;Bauer et al, 2007;Martins, 2007); employment probabilities for the unemployed (Kugler and Saint-Paul, 2004;Nicholson and North, 2004); the overall employment level (Miles, 2000;Autor et al, 2004Autor et al, , 2006Verick, 2004;Schivardi and Torrini, 2008); wages (Friesen, 1996;Leonardi and Pica, 2007;Schivardi and Torrini, 2008); Örm productivity (Autor et al, 2007;Martins, 2007); and work absence (Riphahn, 2004;Engellandt and Riphahn, 2005;Ichino and Riphahn, 2005).…”