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The Effects of Employment Protection on the Choice of Risky Projects

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  • Amihai Glazer
  • Vesa Kanniainen

Abstract

We consider a firm that is subject to employment protection laws that limit the firm‘s ability to fire labor. In particular, we suppose that though a firm which shuts down can fire all its workers, it may fire no fewer. Compared to a firm that is subject to no employment protection, a firm constrained in firing will prefer a risk-free project over a risky one, but may prefer the riskier of two risky projects.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2002/wp-cesifo-2002-03/cesifo_wp689.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 689.

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Date of creation: 2002
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Handle: RePEc:ces:ceswps:_689

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Keywords: project choice; labor protection;

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References

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  1. Bentolila, S. & Saint-Paul, G., 1995. "A model of labour demand with linear adjustment costs," Labour Economics, Elsevier, vol. 2(1), pages 105-105, March.
  2. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
  3. Glazer, A. & Kanniainen, V., 2000. "Term Length and the Quality of Appointments," University of Helsinki, Department of Economics, Department of Economics 485, Department of Economics.
  4. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
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Cited by:
  1. Kessing, Sebastian, 2002. "Employment protection and product market competition," Discussion Papers, Research Unit: Market Processes and Governance FS IV 02-31, Social Science Research Center Berlin (WZB).
  2. Lukach, R. & Plasmans, J.E.J., 2002. "Measuring Knowledge Spillovers using Patent Citations: Evidence from the Belgian Firm's Data," Open Access publications from Tilburg University urn:nbn:nl:ui:12-92281, Tilburg University.
  3. Raquel Fonseca & Natalia Utrero, 2006. "Employment Protection Laws, Barriers to Entrepreneurship, Financial Markets and Firm Size," Working Papers, RAND Corporation Publications Department 454, RAND Corporation Publications Department.

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