Employment Protection and Labor Productivity

Reprint No. 2018:6

Author(s): Carl Magnus BjuggrenYear: 2018 Title: Journal of Public Economics Volume (No.): 157 (January) Pages: 138–157
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Employment Protection and Labor Productivity Carl Magnus Bjuggren

Current 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 Swedish register data. A reform of employment protection rules in 2001 enabled small firms with fewer than eleven employees to exempt two workers from the seniority rules. I treat this reform as a natural experiment. My results indicate that increased labor market flexibility increases labor productivity. This increase is explained by total factor productivity and capital intensity rather than the educational level of workers.

Bjuggren, Carl Magnus (2018), "Employment Protection and Labor Productivity". Journal of Public Economics 157(January), 138–157.

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