Employment Protection and Productivity: Evidence from firm-level panel data in Japan
AbstractRecent developments in the literature on employment protection legislation (EPL) have revealed that changing the stringency of employment protection can lead to extensive consequences outside of the labour market, by affecting firms' production decisions or workers' commitment levels. This paper provides the first empirical evaluation of the comprehensive effect of restrictions on firing employees in Japan, by exploiting the variations in court decisions. We find that judgments lenient to workers significantly reduce firms' total-factor productivity growth rate. The effect on capital is mixed and inconclusive, although we obtain modest evidence that an increase in firing costs induces a negative scale effect on capital inputs.
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Bibliographic InfoPaper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 11078.
Length: 46 pages
Date of creation: Dec 2011
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Other versions of this item:
- H. Okudaira & M. Takizawa & K. Tsuru, 2013. "Employment protection and productivity: evidence from firm-level panel data in Japan," Applied Economics, Taylor & Francis Journals, vol. 45(15), pages 2091-2105, May.
- NEP-ALL-2011-12-19 (All new papers)
- NEP-EFF-2011-12-19 (Efficiency & Productivity)
- NEP-HRM-2011-12-19 (Human Capital & Human Resource Management)
- NEP-LAB-2011-12-19 (Labour Economics)
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