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faculty: "FEB" and publication year: "2011"
| Authors||E.J. Bartelsman, P.A. Gautier, J. de Wind|
|Title||Employment protection, technology choice, and worker allocation|
|Publisher||De Nederlandsche Bank|
|Title series||DNB working paper|
|Faculty||Faculty of Economics and Business|
|Institute/dept.||FEB: Amsterdam School of Economics Research Institute (ASE-RI)|
|Abstract||We show empirically that high-risk innovative sectors are relatively small in countries with strict employment protection legislation (EPL). To understand the mechanism, we develop a two-sector matching model where firms endogenously choose between safe and risky technology. Simulations with our calibrated model are consistent with the data: Strict EPL discourages choosing the emerging risky technology because it is more costly to shed workers upon receiving a bad productivity draw. This mechanism helps explain the lowdown in productivity in the EU relative to the US since the mid-1990s that often is associated with lagging adoption of information technology in the EU.|
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