The Effect of Employment Protection Legislation and Financial Market Imperfections on Investment: Evidence from a Firm-Level Panel of EU Countries

Cingano, Federico; Leonardi, Marco; Messina, Julián; Pica, Giovanni

doi:10.2139/ssrn.1458954

Cited by 95 publications

(78 citation statements)

References 90 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…4 Conversely, this finding is in contrast with studies on European countries (Calcagnini et al, 2009;Cingano et al, 2010) who tend to find a negative relationship between EPL and, respectively, investment and capital-labor ratios.…”

Section: Introductioncontrasting

confidence: 70%

Employment Protection Legislation, Capital Investment and Access to Credit: Evidence from Italy

et al. 2014

Self Cite

View full text Add to dashboard Cite

Employment protection may affect both productivity and capital investment because higher adjustments costs hamper allocative efficiency and may therefore affect both the optimal capitallabor input mix and total factor productivity. To estimate the impact of dismissal costs on capital deepening and productivity we exploit a reform that introduced unjust-dismissal costs in Italy for firms below 15 employees, leaving firing costs unchanged for bigger firms. We provide evidence that the increase in firing costs induced capital deepening and a decline in total factor productivity in small firms relative to larger firms after the reform. We also find that capital deepening is more pronounced at the low-end of the capital distribution -where the reform arguably hit harderand among firms endowed with a larger amount of liquid resources, that have more room to react thanks to an easier access to the credit market. Our results also indicate that the EPL reform reduced the probability to access the credit market, possbily because stricter EPL reduces both the value of the firm and the amount of internal resources that the firm can pledge as collateral against lenders.

show abstract

Section: Introductioncontrasting

confidence: 70%

Employment Protection Legislation, Capital Investment and Access to Credit: Evidence from Italy

et al. 2014

Self Cite

View full text Add to dashboard Cite

show abstract

“…Further, Bassanini, Nunziata, and Venn (2009) extend the latter evidence of a reduction in labor productivity as a result of more worker-friendly labor laws for a sample of OECD countries. By analyzing firm-level data from Italy, Boeri and Garibaldi (2007) are in line with the traditional view on labor regulations summarized in Cingano et al (2009) and find strong support for the conclusion that employment protection reduces productivity.…”

supporting

confidence: 54%

“…These results contradict the traditional argument that labor regulations im-5 pose costs to firms and thus reduce labor force participation, employment (Botero, Djankov, La Porta, Lopez-de-Silanes, & Shleifer, 2004), and investment as well as value added per worker (Cingano, Leonardi, Messina and Pica, 2009). Autor, Kerr, and Kugler (2007) present evidence that imposing employment protection laws increases employment but reduces productivity in the US.…”

mentioning

confidence: 61%

Deregulation, Economic Growth and Growth Acceleration

Stankov

2010

SSRN Journal

View full text Add to dashboard Cite

The paper analyzes the influence of credit-, labor-, and product market deregulation policies on economic growth in more than 70 economies over a period of 30 years. It addresses both the issues of reform measurement and its endogeneity. Specifically, by combining a difference-in-difference strategy with an IV approach to the endogeneity of the reform timing, this work finds that deregulation contributed to the per capita GDP levels of the early reformers relatively more than to the ones of the late reformers. However, the paper also finds that accelerating credit market reforms leads to a large growth acceleration effect for the late reformers, which points to large dynamic welfare gains from deregulation. The latter result suggests that a large-scale credit market re-regulation in the aftermath of the Great Recession is a misguided approach to deal with the consequences of the financial crisis. AbstraktTato studie analyzuje vliv politiky deregulace úvěrového, pracovního a produktového trhu na hospodářský růst ve více než 70 ekonomikách po dobu 30 let. Zabývá se jak otázkami měření dopadů reforem tak i jejich endogenními vlastnostmi. Konkrétně se tato studie zabývá tím, že kombinací rozdílových strategií s přístupem typu IV k endogenním vlastnostem načasování reforem se zjišt'uje, že deregulace přispěly k úrovním HDP dřívějších reformátorů relativně více než k těm reformátorů z pozdějších dob. Nicméně, tato studie také vedla ke zjištění, že urychlení reforem úvěrového trhu má za následek velké zrychlení růstu pro pozdější reformátory, což poukazuje na dynamický přínos v oblasti sociální péče a veřejného blaha zavedením výše zmíněné deregulace. Poslední výsledek naznačuje, že v době po Velké Recesi se velké přeregulování úvěrového trhu jeví jako chybný krok při řešení dopadů finanční krize. AbstractThe paper analyzes the influence of credit-, labor-, and product market deregulation policies on economic growth in more than 70 economies over a period of 30 years. It addresses both the issues of reform measurement and its endogeneity. Specifically, by combining a difference-in-difference strategy with an IV approach to the endogeneity of the reform timing, this work finds that deregulation contributed to the per capita GDP levels of the early reformers relatively more than to the ones of the late reformers. However, the paper also finds that accelerating credit market reforms leads to a large growth acceleration effect for the late reformers, which points to large dynamic welfare gains from deregulation. The latter result suggests that a large-scale credit market re-regulation in the aftermath of the Great Recession is a misguided approach to deal with the consequences of the financial crisis. AbstraktTato studie analyzuje vliv politiky deregulace úvěrového, pracovního a produktového trhu na hospodářský růst ve více než 70 ekonomikách po dobu 30 let. Zabývá se jak otázkami měření dopadů reforem tak i jejich endogenními vlastnostmi. Konkrétně se tato studie zabývá tím, že kombinací rozdílových strategií s p...

show abstract

“…In particular, it has been noted that the appropriateness of this approach relies on the homogeneity of sectors classification across countries in the sample. In a recent paper Cingano et al (2010) discuss this problem, showing as within sector heterogeneity would limit the validity of the use of the US data as a proxy for the natural rate of job reallocation in other countries. Additionally, it has been claimed that this approach would produce a short rather than a longrun measure of job reallocation, due to the incidence of aggregate shocks to the actual data (Fisman and Love 2007and Ciccone and Papaioannou 2006.…”

Section: Empirical Specificationmentioning

confidence: 99%

The impact of temporary employment and employment protection on labour productivity: evidence from an industry-level panel of EU countries

Lisi

2013

J Labour Market Res

View full text Add to dashboard Cite

In recent years the availability of new industrylevel data allowed to evaluate the impact of labour market policies more consistently than previous standard crosscountry studies. In this paper an industry-level panel is exploited to evaluate the impact of Employment Protection Legislation (EPL) for temporary employment (TE), along with permanent employment (PE), in EU countries. Indeed, the advantage of using industry-level data is manifold. The method exploits both cross-country variation in EPL for PE and TE and variation in the relevance of EPL in different industries deriving from a particular diff-in-diff assumption. Differently from the previous literature we apply this idea of the different binding of EPL only for PE, whereas we implement a different strategy for TE which should imply a more accurate identification of the effect of the use of TE on labour productivity. The theoretical literature has not established a clear prediction on the sign of the effects, existing different convincing reasons for both directions. Thus, the results of the analysis have potentially important policy implications. Our main finding is that the use of temporary contracts has a negative, even if small in magnitude, effect on labour productivity. Furthermore, the analysis confirms that EPL for regular contracts reduce labour productivity growth more in those industries requiring a greater employment reallocation.The author would like to thank Stephen Machin, Roberto Cellini, Sergio Destefanis, two anonymous referees and participants in various conferences and seminars for helpful comments and suggestions. However, the analysis and errors remain responsibility of the author alone.

show abstract

The Effect of Employment Protection Legislation and Financial Market Imperfections on Investment: Evidence from a Firm-Level Panel of EU Countries

Cited by 95 publications

References 90 publications

Employment Protection Legislation, Capital Investment and Access to Credit: Evidence from Italy

Employment Protection Legislation, Capital Investment and Access to Credit: Evidence from Italy

Deregulation, Economic Growth and Growth Acceleration

The impact of temporary employment and employment protection on labour productivity: evidence from an industry-level panel of EU countries

Contact Info

Product

Resources

About