Employment Protection Legislation, Multinational Firms, and Innovation

Rachel Griffith and Gareth Macartney
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Gareth Macartney: Institute for Fiscal Studies

The Review of Economics and Statistics, 2014, vol. 96, issue 1, 135-150

Abstract: The theoretical effects of labor regulations, such as employment protection legislation (EPL), on innovation is ambiguous. EPL increases job security, and the greater enforceability of job contracts may increase worker investment in innovative activity. But EPL increases firms' adjustment costs, which may lead to underinvestment in activities that are likely to require adjustment, including technologically advanced innovation. In this paper, we find empirical evidence that these effects are at work—in particular, a higher share of multinational enterprise innovative activity in countries with high EPL is technologically advanced. © 2014 The President and Fellows of Harvard College and the Massachusetts Institute of Technology

Keywords: innovation; employment protection; multinational firm location (search for similar items in EconPapers)
JEL-codes: D21 F23 J24 O31 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (75)

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Related works:
Working Paper: Employment Protection Legislation, Multinational Firms and Innovation (2010)
Working Paper: Employment protection legislation, multinational firms and innovation (2010)
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