Research projects

Employment Protection – How Legislated and Implicit Contracts Affect Job Flows, Productivity, and Labor Market Segmentation

Project manager: Carl Magnus Bjuggren

The aim of the project is to increase the understanding of how employment protection affects firms, individuals, and the economy as a whole. Employment protection decreases the risk of dismissals and thus lowers the worker’s risk associated with economic fluctuations. However, it constitutes a firing cost for the firm which leads to a decrease in the rate of both hires and separations.

Employment protection could also segment the labor market to increase the group of more vulnerable workers that circulate between temporary jobs and unemployment. This group of workers is typically represented by young people, women, and people with lower education and work experience.

The theoretical predictions on the effect of employment protection are ambiguous and more empirical research is therefore needed to increase the understanding of employment protection and its implications.

A field that is relatively unexplored is that of implicit contracts of employment protection. Recent findings indicate that family firms might be able to uphold implicit contracts in which they insure their workers against the risks associated with economic cycles, and in return they are willing to work for less pay. The project investigates the occurrence and consequences of implicit contracts of employment protection in family firms. The project also investigates the effect of legislated employment protection on productivity, worker effort, capital deepening, and labor market segmentation.

International cooperation

Visiting researchers

Collaborating with others is essential for IFN as a research institute. Our researchers co-author articles with colleagues from other institutes, and many also teach at various universities and colleges.

As part of our extensive program of guest researchers, leading international researchers visit the institute. The visitors present and pursue their research as well as interact and cooperate with researchers at IFN.

Jordglob 1 för webb


Research Institute of Industrial Economics, Grevgatan 34 - 2 fl, Box 55665, SE-102 15 Stockholm, Sweden | Phone: +46-(0)8-665 45 00 |