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The Effect of Employment Protection Rules on Firm Productivity - A Natural Experiment
Linköping University, Department of Management and Engineering, Economics. Linköping University, The Institute of Technology.
2013 (English)Report (Other academic)
Abstract [en]

In this paper I study the effect of employment protection rules on firm productivity using micro data on Swedish firms. A reform of the employment protection rules in 2001 made it possible for small firms to exempt two employees from the last-in-first-out rules. The reform targeted only firms with less than 11 employees, representing a natural experiment. I exploit this using a difference-in-differences framework to estimate the reform's effect on labor productivity. By using firm register data I am able to get a precise estimate of labor productivity for all firms in the economy. The results indicate that the reform increased labor productivity by 2.5 percent for the treatment group of small firms compared to the control group of larger firms. This is shown to be economically significant. The results appear to be driven by the smallest firms and firms that were downsizing. When restricting the sample to include only firms that were downsizing and firms that stayed within the group of treatment and control throughout the whole time period, the estimated increase in labor productivity reaches 6 percent. This effect is likely due to a combination of a decrease in moral hazard behavior and an increased possibility for small firms to retain or lay o personnel based on the worker's idiosyncratic productivity.

Place, publisher, year, edition, pages
The Swedish Retail Institute (HUI) , 2013. , 38 p.
, HUI Working Papers, 82
Keyword [en]
Employment Protection; Labor Market Regulations; Labor Productivity; Last-in-First-out Rules
National Category
URN: urn:nbn:se:liu:diva-90628OAI: diva2:613941

JEL codes: D22, J08, J32, J38, K31, O43

Available from: 2013-04-02 Created: 2013-04-02 Last updated: 2015-03-03Bibliographically approved
In thesis
1. Family Matters: Essays on Family Firms and Employment Protection
Open this publication in new window or tab >>Family Matters: Essays on Family Firms and Employment Protection
2013 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis is a study of firm dynamics, family ownership, and employment protection. It addresses the implications of employment protection on firm productivity and how family owned firms react differently with regard to economic shocks. It also investigates whether family ownership matters for the probability of exhibiting high growth. By using a novel data identification strategy, family ownership is identified in full population register data. The thesis also highlights some important caveats in the official statistics on self-employment.

Abstract [sv]

Denna avhandling behandlar företagsdynamik, familjeägande och anställningsskydd. I avhandlingen analyseras anställningsskyddet och hur det påverkar företagens produktivitet, samt hur familjeägda företag reagerar på chocker inom industrin. I avhandlingen analyseras också hur familjeägande påverkar sannolikheten för ett företag att uppnå en hög tillväxttakt. Genom att kombinera olika statistikkällor kan samtliga familjeföretag i den den svenska företagspopulationen identifieras. Avhandlingen belyser också några av de problem som finns i den officiella statistiken över egenföretagare. 

Place, publisher, year, edition, pages
Linköping: Linköping University Electronic Press, 2013. 35 p.
Linköping Studies in Arts and Science, ISSN 0282-9800 ; 592
Family firms, employment protection, firm dynamics, high-growth firms, Familjeföretag, anställningsskydd, företagsdynamik, snabbväxande företag
National Category
Economics and Business Economics Business Administration
urn:nbn:se:liu:diva-100156 (URN)10.3384/diss.diva-100156 (DOI)978-91-7519-495-0 (print) (ISBN)
Public defence
2013-11-29, ACAS, Hus A, Campus Valla, Linköpings universitet, Linköping, 10:15 (English)
Available from: 2013-10-30 Created: 2013-10-30 Last updated: 2015-06-02Bibliographically approved

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