Working Paper No. 1061

The Effect of Employment Protection on Labor Productivity

Published: March 16, 2015, revised April 2015Pages: 40Keywords: Employment Protection; Labor Market Regulations; Labor Productivity; Last-in-First-out RulesJEL-codes: D22; J23; J24; J32; J38; K31; M51

The Effect of Employment Protection on Labor Productivity Carl Magnus Bjuggren


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.

An Agenda for Europe

Institutional Reform for Innovation and Entrepreneurship

Omslag 2017 Institutional Reform for Innovation and Entrepreneurship.jpg

The authors of this book, Niklas Elert, Magnus Henrekson and Mikael Stenkula, advise the economies of the European Union to become more entrepreneurial in promoting innovation and economic growth. The authors propose a reform strategy with respect to several aspects to achieve this goal.

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