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The Effects of Employment Protection on the Choice of Risky Projects

  • Glazer, A.
  • Kanniainen, V.

We consider a firm that is subject to employment protection laws that limit the firm's ability to fire labor. In particular, we suppose that though a firm which shuts down can fire all its workers, it may fire no fewer. Compared to a firm that is subject to no employment protection, a firm constrained in firing will prefer a risk-free project over a risky one, but may prefer the riskier of two risky projects.

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Paper provided by Department of Economics in its series University of Helsinki, Department of Economics with number 487.

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Length: 15 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:fth:helsec:487
Contact details of provider: Postal: University of Helsinki; Department of Economics, P.O.Box 54 (Unioninkatu 37) FIN-00014 Helsingin Yliopisto
Phone: +358 9 191 8897
Fax: +358 9 191 8877
Web page: http://www.helsinki.fi/politiikkajatalous/
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  1. Bentolila, Samuel & Saint-Paul, Gilles, 1992. "A Model of Labour Demand with Linear Adjustment Costs," CEPR Discussion Papers 690, C.E.P.R. Discussion Papers.
  2. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
  3. Glazer, A. & Kanniainen, V., 2000. "Term Length and the Quality of Appointment," Papers 00-04, California Irvine - School of Social Sciences.
  4. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
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