The Effects of Employment Protection on the Choice of Risky Projects
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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- Glazer, A. & Kanniainen, V., 2000.
"Term Length and the Quality of Appointments,"
University of Helsinki, Department of Economics
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