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Dismissal Laws, Innovation and Economic Growth

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  • Krishnamurthy V. Subramanian

Abstract

The paper theoretically and empirically show that dismissal laws and laws that impose hurdles on firing of employees - spur innovation and thereby economic growth. Theoretically, dismissal laws make it costly for firms to arbitrarily discharge employees. This enables firms to commit to not punish short-run failures of employees. Because innovation is inherently risky and employment contracts are incomplete, dismissal laws enable such commitment.

Suggested Citation

  • Krishnamurthy V. Subramanian, 2018. "Dismissal Laws, Innovation and Economic Growth," Working Papers id:12794, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:12794
    Note: Institutional Papers
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    References listed on IDEAS

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    Cited by:

    1. Antonio ALOISI & Valerio DE STEFANO, 2020. "Regulation and the future of work: The employment relationship as an innovation facilitator," International Labour Review, International Labour Organization, vol. 159(1), pages 47-69, March.
    2. Pradip Kumar Biswas & Saurabh Bandyopadhyay, 2021. "Labour Market Institutions, Industry Structure and Productivity in Indian Manufacturing Sector," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 64(4), pages 999-1021, December.

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