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Employment Protection and Firm Relocation: Theory and Evidence

Gerda Dewit (), Holger Görg () and Yama Temouri ()
Additional contact information
Gerda Dewit: National University of Ireland, Maynooth
Holger Görg: Kiel Institute for the World Economy
Yama Temouri: Aston University

No 11500, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We examine the determinants of the decision to relocate activities abroad for firms located in OECD countries. We argue that particular firm-specific features play a crucial role for the link between employment protection and relocation. Stricter employment protection laws over time in the current production location discourage firms' relocation abroad. While larger, more productive firms and firms with higher labour intensities have, ceteris paribus, higher propensities to relocate, they also face higher exit barriers if the country from which they consider relocating has strict employment protection laws. Our predictions are supported empirically, using firm level panel data for 28 OECD countries over the period 1997-2007.

Keywords: employment protection; relocation; multinational enterprises (search for similar items in EconPapers)
JEL-codes: F23 L23 J88 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2018-04
New Economics Papers: this item is included in nep-bec, nep-lab, nep-law and nep-sbm
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Forthcoming in: Economica, 2018

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