The Effect of Employment Protection on Labor Productivity

Arbeitspapier

The theoretical predictions of how employment protection affects firm productivity are ambiguous. In this paper I study the effect of employment protection rules on labor productivity using micro data on Swedish firms. A reform of the employment protection rules in 2001 made it possible for small firms with less than eleven employees to exempt two workers from the seniority rules. I exploit the reform as a natural experiment. My results indicate that increased labor market flexibility increases labor productivity. The increase appears to be driven mainly by the older and the smallest firms. It is not explained by capital intensity or the educational level of workers.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IFN Working Paper ; No. 1061

Classification and Topics

• Classification: Wirtschaft ; Firm Behavior: Empirical Analysis ; Labor Demand ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions ; Wages, Compensation, and Labor Costs: Public Policy ; Labor Law ; Personnel Economics: Firm Employment Decisions; Promotions
• Subject: Employment Protection ; Labor Market Regulations ; Labor Productivity ; Last-in-First-out Rules

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bjuggren, Carl Magnus
• Event: Veröffentlichung
• (who): Research Institute of Industrial Economics (IFN)
• (where): Stockholm
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/109082
• Last update: 10.03.2025, 11:42 AM CET