Labor market reform and innovation: Evidence from Spain

María García-Vega, Richard Kneller and Joel Stiebale

Research Policy, 2021, vol. 50, issue 5

Abstract: We analyze the effect of a labor market reform on firms’ product innovation. The reform, which amounts to a natural experiment, differentially reduced firing costs for some firms, thereby lowering adjustment costs in the presence of demand uncertainty. Using a difference-in-differences framework, we show that the reform increased product innovations. We also provide evidence that the reform induced upgrading of product quality and enabled firms to grow faster and enter new markets. The effects are concentrated in industries with high levels of demand volatility and R&D intensity, where flexible adjustments to unexpected shocks are important.

Keywords: Innovation; New products; Productivity; Labor market reform; EPL (search for similar items in EconPapers)
JEL-codes: D22 G31 J3 O31 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0048733321000172
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Labor market reform and innovation: Evidence from Spain (2020)
Working Paper: Labour market reform and innovation: Evidence from Spain (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:respol:v:50:y:2021:i:5:s0048733321000172

DOI: 10.1016/j.respol.2021.104213

Access Statistics for this article

Research Policy is currently edited by M. Bell, B. Martin, W.E. Steinmueller, A. Arora, M. Callon, M. Kenney, S. Kuhlmann, Keun Lee and F. Murray

More articles in Research Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().