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The Effect of Employment Protection on Labor Productivity

Carl Magnus Bjuggren ()

No 1061, Working Paper Series from Research Institute of Industrial Economics

Abstract: The 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 micro data on Swedish firms. A reform of the employment protection rules in 2001 made it possible for small firms with less than eleven employees to exempt two workers from the seniority rules. I exploit the reform as a natural experiment. My results indicate that increased labor market exibility increases labor productivity. The increase is not explained by capital intensity or the educational level of workers.

Keywords: Employment Protection; Labor Market Regulations; Labor Productivity; Last-in-First-out Rules (search for similar items in EconPapers)
JEL-codes: D22 J23 J24 J32 J38 K31 M51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff, nep-eur, nep-lab and nep-lma
Date: 2015-03-16, Revised 2015-04-16
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Working Paper: The Effect of Employment Protection Rules on Firm Productivity - A Natural Experiment (2013) Downloads
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