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Does employment protection legislation affect firm investment? The European case

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  • Calcagnini, Giorgio
  • Ferrando, Annalisa
  • Giombini, Germana

Abstract

This paper aims at analyzing the impact of Employment Protection Legislation (EPL) on firms' investment policies in the contemporaneous presence of financial imperfections. Our results show that investment is significantly affected by the presence of both market imperfections; they are robust to alternative measures of EPL. Moreover, the effect of labor market regulation is weaker wherever financial market imperfections are smaller: firms with better access to financial markets are in a position to determine their optimal investment policy, even in the presence of stringent employment protection laws, than those facing financial constraints.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 36 (2014)
Issue (Month): C ()
Pages: 658-665

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Handle: RePEc:eee:ecmode:v:36:y:2014:i:c:p:658-665

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Web page: http://www.elsevier.com/locate/inca/30411

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Keywords: Employment protection legislation; Financial constraints; Investments;

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Cited by:
  1. Federico Cingano & Marco Leonardi & Julián Messina & Giovanni Pica, 2010. "The effects of employment protection legislation and financial market imperfections on investment: evidence from a firm-level panel of EU countries," Economic Policy, CEPR & CES & MSH, vol. 25, pages 117-163, 01.
  2. Giorgio Calcagnini & Annalisa Ferrando & Germana Giombini, 2013. "Multiple Market Imperfections, Firm Profitability and Investment," Working Papers 1305, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2013.

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