Employment Protection and Productivity: Evidence from firm-level panel data in Japan

Hiroko Okudaira, Miho Takizawa and Kotaro Tsuru

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: Recent developments in the literature on employment protection legislation (EPL) have revealed that changing the stringency of employment protection can lead to extensive consequences outside of the labour market, by affecting firms' production decisions or workers' commitment levels. This paper provides the first empirical evaluation of the comprehensive effect of restrictions on firing employees in Japan, by exploiting the variations in court decisions. We find that judgments lenient to workers significantly reduce firms' total-factor productivity growth rate. The effect on capital is mixed and inconclusive, although we obtain modest evidence that an increase in firing costs induces a negative scale effect on capital inputs.

Pages: 46 pages
Date: 2011-12
New Economics Papers: this item is included in nep-eff, nep-hrm and nep-lab
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https://www.rieti.go.jp/jp/publications/dp/11e078.pdf (application/pdf)

Related works:
Journal Article: Employment protection and productivity: evidence from firm-level panel data in Japan (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:11078

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