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Job protection legislation and productivity growth in OECD countries

  • Andrea Bassanini
  • Luca Nunziata
  • Danielle Venn

"We examine the effect of dismissal regulation on productivity in the OECD, using annual cross-country aggregate data on the stringency of employment protection legislation and industry-level data on productivity from 1982 to 2003. Our empirical results suggest that mandatory dismissal regulations have a depressing impact on productivity growth in industries where layoff restrictions are more likely to be binding. By contrast, we find no evidence of a productivity effect of regulations concerning temporary contracts, which suggests that partial reforms, facilitating the use of fixed-term and atypical contracts, are unlikely to have an important impact on efficiency and technological change and cannot therefore be a substitute for comprehensive reforms whereby dismissal restrictions for open-ended contracts are also weakened." Copyright (c) CEPR, CES, MSH, 2009.

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Article provided by CEPR & CES & MSH in its journal Economic Policy.

Volume (Year): 24 (2009)
Issue (Month): (04)
Pages: 349-402

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Handle: RePEc:bla:ecpoli:v:24:y:2009:i::p:349-402
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