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Employment protection and firm relocation: Theory and evidence

Gerda Dewit, Holger Görg and Yama Temouri

No 2102, Kiel Working Papers from Kiel Institute for the World Economy (IfW)

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 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 data for 28 OECD countries.

Keywords: Employment Protection; Relocation; Multinational Enterprises (search for similar items in EconPapers)
JEL-codes: F23 L23 J88 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-bec, nep-lab and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:2102

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