IDEAS home Printed from https://ideas.repec.org/a/eee/pubeco/v157y2018icp138-157.html
   My bibliography  Save this article

Employment protection and labor productivity

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0047272717302013
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Andrea Bassanini & Luca Nunziata & Danielle Venn, 2009. "Job protection legislation and productivity growth in OECD countries," Economic Policy, CEPR;CES;MSH, vol. 24, pages 349-402, April.
    2. 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.
    3. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    4. Olsson, Martin, 2009. "Employment protection and sickness absence," Labour Economics, Elsevier, vol. 16(2), pages 208-214, April.
    5. Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084 Elsevier.
    6. Saint-Paul, Gilles, 2002. "Employment protection, international specialization, and innovation," European Economic Review, Elsevier, vol. 46(2), pages 375-395, February.
    7. Timothy C. Sargent & Edgard R. Rodriguez, 2000. "Labour or Total Factor Productivity: Do We Need to Choose?," International Productivity Monitor, Centre for the Study of Living Standards, vol. 1, pages 41-44, Fall.
    8. Olsson, Martin, 2013. "Employment protection and parental child care," Working Paper Series 2013:2, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    9. Federico Cingano & Marco Leonardi & Julián Messina & Giovanni Pica, 2016. "Employment Protection Legislation, Capital Investment and Access to Credit: Evidence from Italy," Economic Journal, Royal Economic Society, vol. 126(595), pages 1798-1822, September.
    10. Lindbeck, Assar & Palme, Mårten & Persson, Mats, 2006. "Job Security and Work Absence: Evidence from a Natural Experiment," Research Papers in Economics 2006:3, Stockholm University, Department of Economics.
    11. Fredrik Heyman & Per Skedinger, 2016. "Employment Protection Reform, Enforcement in Collective Agreements and Worker Flows," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 55(4), pages 662-704, October.
    12. Thomas K. Bauer & Stefan Bender & Holger Bonin, 2007. "Dismissal Protection and Worker Flows in Small Establishments," Economica, London School of Economics and Political Science, vol. 74(296), pages 804-821, November.
    13. Magnus Henrekson & Dan Johansson, 2010. "Gazelles as job creators: a survey and interpretation of the evidence," Small Business Economics, Springer, vol. 35(2), pages 227-244, September.
    14. repec:bla:scandj:v:119:y:2017:i:4:p:1105-1128 is not listed on IDEAS
    15. Pedro S. Martins, 2009. "Dismissals for Cause: The Difference That Just Eight Paragraphs Can Make," Journal of Labor Economics, University of Chicago Press, vol. 27(2), pages 257-279, April.
    16. Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 326-365, June.
    17. Tarjei Havnes & Magne Mogstad, 2011. "No Child Left Behind: Subsidized Child Care and Children's Long-Run Outcomes," American Economic Journal: Economic Policy, American Economic Association, vol. 3(2), pages 97-129, May.
    18. von Below, David & Thoursie, Peter Skogman, 2010. "Last in, first out?: Estimating the effect of seniority rules in Sweden," Labour Economics, Elsevier, vol. 17(6), pages 987-997, December.
    19. David H. Autor & John J. Donohue & Stewart J. Schwab, 2004. "The Employment Consequences of Wrongful-Discharge Laws: Large, Small, or None at All?," American Economic Review, American Economic Association, vol. 94(2), pages 440-446, May.
    20. Edward P. Lazear, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 699-726.
    21. Kugler, Adriana & Pica, Giovanni, 2008. "Effects of employment protection on worker and job flows: Evidence from the 1990 Italian reform," Labour Economics, Elsevier, vol. 15(1), pages 78-95, February.
    22. Tito Boeri & Pietro Garibaldi, 2007. "Two Tier Reforms of Employment Protection: a Honeymoon Effect?," Economic Journal, Royal Economic Society, vol. 117(521), pages 357-385, June.
    23. Pietro Garibaldi & Lia Pacelli & Andrea Borgarello, 2004. "Employment Protection Legislation and the Size of Firms," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 63(1), pages 33-68, April.
    24. Saint-Paul, Gilles, 1997. "Is labour rigidity harming Europe's competitiveness? The effect of job protection on the pattern of trade and welfare," European Economic Review, Elsevier, vol. 41(3-5), pages 499-506, April.
    25. John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2013. "Who Creates Jobs? Small versus Large versus Young," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 347-361, May.
    26. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-938, October.
    27. Michele Belot & Jan Boone & Jan Van Ours, 2007. "Welfare-Improving Employment Protection," Economica, London School of Economics and Political Science, vol. 74(295), pages 381-396, August.
    28. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-475, March.
    29. Andrea Ichino & Regina T. Riphahn, 2005. "The Effect of Employment Protection on Worker Effort: Absenteeism During and After Probation," Journal of the European Economic Association, MIT Press, vol. 3(1), pages 120-143, March.
    30. Adriana D. Kugler & Gilles Saint-Paul, 2004. "How Do Firing Costs Affect Worker Flows in a World with Adverse Selection?," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 553-584, July.
    31. repec:eee:labchp:v:3:y:1999:i:pc:p:3029-3084 is not listed on IDEAS
    32. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    33. Donald Boyd & Hamilton Lankford & Susanna Loeb & James Wyckoff, 2011. "Teacher Layoffs: An Empirical Illustration of Seniority versus Measures of Effectiveness," Education Finance and Policy, MIT Press, vol. 6(3), pages 439-454, July.
    34. Gregory DeFreitas & Adriana Marshall, 1998. "Labour Surplus, Worker Rights and Productivity Growth: A Comparative Analysis of Asia and Latin America," LABOUR, CEIS, vol. 12(3), pages 515-539, September.
    35. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
    36. Gary S. Becker, 1975. "Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education, Second Edition," NBER Books, National Bureau of Economic Research, Inc, number beck75-1, August.
    37. David H. Autor & William R. Kerr & Adriana D. Kugler, 2007. "Does Employment Protection Reduce Productivity? Evidence From US States," Economic Journal, Royal Economic Society, vol. 117(521), pages 189-217, June.
    38. Koeniger, Winfried, 2005. "Dismissal costs and innovation," Economics Letters, Elsevier, vol. 88(1), pages 79-84, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:oup:indcch:v:26:y:2017:i:1:p:169-185. is not listed on IDEAS
    2. Niklas Elert & Magnus Henrekson, 2016. "Evasive entrepreneurship," Small Business Economics, Springer, vol. 47(1), pages 95-113, June.
    3. Anders Bornhäll & Sven-Olov Daunfeldt & Niklas Rudholm, 2017. "Employment protection legislation and firm growth: evidence from a natural experiment," Industrial and Corporate Change, Oxford University Press, vol. 26(1), pages 169-185.

    More about this item

    Keywords

    Employment protection; Labor market regulations; Labor productivity; Last-in-first-out rules;

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:pubeco:v:157:y:2018:i:c:p:138-157. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/505578 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.