Employment protection and productivity: evidence from firm-level panel data in Japan
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 the labour market, by affecting firms’ production decisions or workers’ commitment
levels. This article 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 judgements 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.
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total factor productivity
Document Type: Research Article
Department of Economics,Okayama University, 3-1-1, Tsushima-naka, Kita-kuOkayama City,Okayama 700-8530, Japan
Department of Economics,Toyo University, 5-28-20, HakusanBunkyo-ku,Tokyo 112-8606, Japan
The Research Institute of Economy,Trade and Industry, 1-3-1, KasumigasekiChiyoda-ku,Tokyo 100-8901, Japan
Publication date: 2013-05-01
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