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Employment protection and labor productivity

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  • Bjuggren, Carl Magnus

Abstract

Current theoretical predictions of how employment protection affects firm productivity are ambiguous. In this paper, I study the effect of employment protection rules on labor productivity using Swedish register data. A reform of employment protection rules in 2001 enabled small firms with fewer than eleven employees to exempt two workers from the seniority rules. I treat this reform as a natural experiment. My results indicate that increased labor market flexibility increases labor productivity. This increase is explained by total factor productivity and capital intensity rather than the educational level of workers.

Suggested Citation

  • Bjuggren, Carl Magnus, 2018. "Employment protection and labor productivity," Journal of Public Economics, Elsevier, vol. 157(C), pages 138-157.
    • Handle: RePEc:eee:pubeco:v:157:y:2018:i:c:p:138-157
    DOI: 10.1016/j.jpubeco.2017.11.007
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    More about this item

    Keywords

    Employment protection; Labor market regulations; Labor productivity; Last-in-first-out rules;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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