Collective Dismissal Cost, Product Market Competition and Innovation
Collective dismissal costs are an important part of employment protection legislation (EPL) and make firms' exit more costly. We show in a model with step-by-step innovations that dismissal costs spur innovation if product markets are not too competitive: technologically more advanced firms endogenously exit with smaller probability so that there is a dynamic incentive to innovate. But dismissal costs decrease the absolute value of firms and induce exit. These opposite effects and their dependence on the policy mix of EPL and product market regulation explain why empirical studies have difficulties to find a negative effect of EPL on innovation.
|Date of creation:||Oct 2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005.
"Competition and Innovation: An Inverted-U Relationship,"
The Quarterly Journal of Economics,
MIT Press, vol. 120(2), pages 701-728, May.
- Howitt, Peter & Griffith, Rachel & Aghion, Philippe & Blundell, Richard & Bloom, Nick, 2005. "Competition and Innovation: An Inverted-U Relationship," Scholarly Articles 4481507, Harvard University Department of Economics.
- Philippe Aghion & Nicholas Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2002. "Competition and Innovation: An Inverted U Relationship," NBER Working Papers 9269, National Bureau of Economic Research, Inc.
- Philippe Aghion & Nicholas Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2002. "Competition and innovation: an inverted U relationship," IFS Working Papers W02/04, Institute for Fiscal Studies.
- Nickell, Stephen, 1999. "Product markets and labour markets1," Labour Economics, Elsevier, vol. 6(1), pages 1-20, March.
- Harris, Christopher & Howitt, Peter & Vickers, John & Aghion, Philippe, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," Scholarly Articles 12375013, Harvard University Department of Economics.
- Levine, David I, 1991. "Just-Cause Employment Policies in the Presence of Worker Adverse Selection," Journal of Labor Economics, University of Chicago Press, vol. 9(3), pages 294-305, July.
- Aghion, Philippe & Harris, Christopher & Vickers, John, 1997. "Competition and growth with step-by-step innovation: An example," European Economic Review, Elsevier, vol. 41(3-5), pages 771-782, April.
- Bassanini, Andrea & Ernst, Ekkehard, 2001.
"Labour market regulation, industrial relations, and technological regimes: a tale of comparative advantage,"
CEPREMAP Working Papers (Couverture Orange)
- Andrea Bassanini & Ekkehard Ernst, 2002. "Labour market regulation, industrial relations and technological regimes: a tale of comparative advantage," Industrial and Corporate Change, Oxford University Press, vol. 11(3), pages 391-426, June.
- Steven Casper & Henrik Glimstedt, 2001. "Economic Organization, Innovation Systems, and the Internet," Oxford Review of Economic Policy, Oxford University Press, vol. 17(2), pages 265-281, Summer.
- Saint-Paul, Gilles, 2002.
"Employment protection, international specialization, and innovation,"
European Economic Review,
Elsevier, vol. 46(2), pages 375-395, February.
- Saint-Paul, G., 1995. "Employment Protection, International Specialization, and Innovation," DELTA Working Papers 95-31, DELTA (Ecole normale supérieure).
- Gilles Saint Paul, 1996. "Employment protection, international specialization and innovation," Economics Working Papers 256, Department of Economics and Business, Universitat Pompeu Fabra, revised May 1997.
- Saint-Paul, Gilles, 1996. "Employment Protection, International Specialization, and Innovation," CEPR Discussion Papers 1338, C.E.P.R. Discussion Papers.
- Aghion, Philippe, et al, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," Review of Economic Studies, Wiley Blackwell, vol. 68(3), pages 467-92, July.
- Giulio Fella, 2000. "Investment in General Training with Consensual Layoffs," Working Papers 418, Queen Mary University of London, School of Economics and Finance.
- Andrea Bassanini & Ekkehard Ernst, 2002. "Labour Market Institutions, Product Market Regulation, and Innovation: Cross-Country Evidence," OECD Economics Department Working Papers 316, OECD Publishing.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp888. 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: (Mark Fallak)
If references are entirely missing, you can add them using this form.