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When labour market rigidities are useful for innovation. Evidence from German IAB firm-level data

Sergei Hoxha and Alfred Kleinknecht ()

Research Policy, 2020, vol. 49, issue 7

Abstract: Supply-side economists made numerous pleas for removing labour market rigidities through ‘structural reforms’. From a Schumpeterian viewpoint, however, one can argue that labour market rigidities create useful incentives for innovation. Our estimates on German panel data (2007–2015) support the Schumpeterian view. Using the taxonomy of industries by Peneder (2010) we find that evidence of the Schumpeterian view is particularly strong in R&D intensive manufacturing industries, as well as in service industries with high degrees of cumulativeness of knowledge. Evidence of the Schumpeterian view is weaker in low-technology industries and in start-ups when firms rely more on generally available knowledge rather than on firm-specific and tacit knowledge accumulated in the past.

Keywords: Innovation; Labour market flexibility; Varieties of capitalism (search for similar items in EconPapers)
JEL-codes: J53 M54 O31 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.respol.2020.104066

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