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Human capital, employment protection and growth in Europe

Conti, Maurizio and Sulis, Giovanni (2010) Human capital, employment protection and growth in Europe. Cagliari, CRENoS - CUEC. p. 10 (Working Papers CRENoS, 2010, 28). ISBN 978-88-84-67-634-4. Working Paper.

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Abstract

Using data for 51 manufacturing and service sector for the period 1970-2005 in 14 countries, this paper show that employment protection legislation has a negative and significant effect on growth of value added and hours of work in more human capital intensive sectors. We argue that labour market regulation has a negative impact on the technology adoption mechanism through its heterogeneous impact on firms' workforce adjustment requirements. In fact, technology adoption depends both on the skill level of the workforce and the capacity of firms to optimally adjust their employment levels as technology changes. As a consequence, firing costs have a relatively stronger impact in sectors in which technology adoption is more important. Our empirical results are robust to various sensitivity checks such as interactions of human capital intensity with other country level variables, of employment protection with other sector level variables and endogeneity of firing restrictions. We also show that the negative effect of EPL is stronger the smaller the distance from the technology frontier and after the 1990s.

Item Type:Working Paper
ID Code:5602
Status:Published
Uncontrolled Keywords:Growth, human capital, technology adoption, employment protection legislation, sectors
Subjects:Area 06 - Scienze mediche > MED/36 Diagnostica per immagini e radioterapia
Divisions:002 Altri enti e centri di ricerca del Nord Sardegna > CRENoS-Centro Ricerche Economiche Nord Sud, Università di Cagliari e Università di Sassari
001 Università di Sassari > 03 Istituti > Scienze radiologiche
Publisher:CRENoS - CUEC
Copyright Holders:© CUEC 2010
ISBN:978-88-84-67-634-4
Publisher Policy:Depositato per gentile concessione del CRENoS e di CUEC
Deposited On:21 Feb 2011 12:52

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