Human Capital, Employment Protection and Growth in Europe
AbstractUsing data for 51 manufacturing and service sector for the period 1970-2005 in 14 countries, this paper show that employment protection legislation has a negative and significant effect on growth of value added and hours of work in more human capital intensive sectors. We argue that labour market regulation has a negative impact on the technology adoption mechanism through its heterogeneous impact on firms workforce adjustment requirements. In fact, technology adoption depends both on the skill level of the workforce and the capacity of firms to optimally adjust their employment levels as technology changes. As a consequence, firing costs have a relatively stronger impact in sectors in which technology adoption is more important. Our empirical results are robust to various sensitivity checks such as interactions of human capital intensity with other country level variables, of employment protection with other sector level variables and endogeneity of firing restrictions. We also show that the negative effect of EPL is stronger the smaller the distance from the technology frontier and after the 1990s.
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Bibliographic InfoPaper provided by Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia in its series Working Paper CRENoS with number 201028.
Date of creation: 2010
Date of revision:
technology adoption; growth; human capital; sectors; employment protection legislation;
Find related papers by JEL classification:
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-03 (All new papers)
- NEP-EEC-2011-01-03 (European Economics)
- NEP-EUR-2011-01-03 (Microeconomic European Issues)
- NEP-HRM-2011-01-03 (Human Capital & Human Resource Management)
- NEP-LAB-2011-01-03 (Labour Economics)
- NEP-REG-2011-01-03 (Regulation)
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- G. Cardullo & M. Conti & G. Sulis, 2012. "Sunk Capital, Unions and the Hold-Up Problem: Theory and Evidence from Sectoral Data," Working Paper CRENoS 201226, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
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