Dismissal Laws, Innovation and Economic Growth

Krishnamurthy V. Subramanian

Working Papers from eSocialSciences

Abstract: The paper theoretically and empirically show that dismissal laws and laws that impose hurdles on firing of employees - spur innovation and thereby economic growth. Theoretically, dismissal laws make it costly for firms to arbitrarily discharge employees. This enables firms to commit to not punish short-run failures of employees. Because innovation is inherently risky and employment contracts are incomplete, dismissal laws enable such commitment.

Keywords: eSS; Labor laws; R&D; Technological change; Law and Önance; Entrepreneurship; Growth; economic growth; dismissal laws; federal workers. (search for similar items in EconPapers)
Date: 2018-05
Note: Institutional Papers
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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