TY - JOUR
T1 - Employment protection and productivity
T2 - Evidence from firm-level panel data in Japan
AU - Okudaira, H.
AU - Takizawa, M.
AU - Tsuru, K.
N1 - Funding Information:
We would like to thank an anonymous referee, Fumio Ohtake, Charles Y. Horioka, Daiji Kawaguchi, Takuji Kawamoto, Masayuki Takahara as well as the seminar participants at RIETI, the spring meeting for the Japanese Economic Association 2008 for their helpful comments. Okudaira acknowledges a grant from the Japan Society for the Promotion of Science.
PY - 2013/5
Y1 - 2013/5
N2 - Recent developments in the literature on Employment Protection Legislation (EPL) have revealed that changing the stringency of employment protection can lead to extensive consequences outside the labour market, by affecting firms' production decisions or workers' commitment levels. This article provides the first empirical evaluation of the comprehensive effect of restrictions on firing employees in Japan, by exploiting the variations in court decisions. We find that judgements lenient to workers significantly reduce firms' total-factor productivity growth rate. The effect on capital is mixed and inconclusive, although we obtain modest evidence that an increase in firing costs induces a negative scale effect on capital inputs.
AB - Recent developments in the literature on Employment Protection Legislation (EPL) have revealed that changing the stringency of employment protection can lead to extensive consequences outside the labour market, by affecting firms' production decisions or workers' commitment levels. This article provides the first empirical evaluation of the comprehensive effect of restrictions on firing employees in Japan, by exploiting the variations in court decisions. We find that judgements lenient to workers significantly reduce firms' total-factor productivity growth rate. The effect on capital is mixed and inconclusive, although we obtain modest evidence that an increase in firing costs induces a negative scale effect on capital inputs.
KW - capital substitution
KW - employment protection
KW - firing cost
KW - total factor productivity
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U2 - 10.1080/00036846.2012.654913
DO - 10.1080/00036846.2012.654913
M3 - Article
AN - SCOPUS:84859640835
SN - 0003-6846
VL - 45
SP - 2091
EP - 2105
JO - Applied Economics
JF - Applied Economics
IS - 15
ER -
