Does Employment Protection Reduce Productivity ? Evidence from Us States *

@inproceedings{Autor2007DoesEP,
  title={Does Employment Protection Reduce Productivity ? Evidence from Us States *},
  author={David H. Autor and William R. Kerr and Adriana D. Kugler},
  year={2007}
}
Theory predicts that mandated employment protection may reduce productivity by distorting production choices. We use the adoption of wrongful-discharge protection by state courts in the US from 1970 to 1999 to evaluate the empirical link between dismissal costs and productivity. Drawing on establishment-level data from the Census Bureau, our estimates suggest that wrongful-discharge protection reduces employment flows and firm entry rates. Moreover, plants engage in capital deepening and… CONTINUE READING
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