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| Authors | E.J. Bartelsman, P.A. Gautier, J. de Wind | | Title | Employment protection, technology choice, and worker allocation |
| Publisher | De Nederlandsche Bank |
| Place | Amsterdam |
| Year | 2011 |
| Pages | 56 |
| Title series | DNB working paper |
| Series number | 295 |
| Faculty | Faculty of Economics and Business |
| Institute/dept. | FEB: Research Institute in Economics and Econometrics Amsterdam (RESAM) |
| 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. |
| Document type | Report |
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