Working Paper Series
Carl Magnus Bjuggren
The Effect of Employment Protection on Labor Productivity
Abstract: 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 exibility
increases labor productivity. The increase is not explained by capital
intensity or the educational level of workers.
Keywords: Employment Protection; Labor Market Regulations; Labor Productivity; Last-in-First-out Rules; (follow links to similar papers)
JEL-Codes: D22; J23; J24; J32; J38; K31; M51; (follow links to similar papers)
40 pages, March 16, 2015, Revised April 16, 2015
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