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How labor market institutions affect job creation and productivity growth

Author

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  • Magnus Henrekson

    (Research Institute of Industrial Economics, Sweden)

Abstract

Economic growth requires factor reallocation across firms and continuous replacement of technologies. Labor market institutions influence economic dynamism by their impact on the supply of a key factor, skilled workers to new and expanding firms, and the shedding of workers from declining and failing firms. Growth-favoring labor market institutions include portable pension plans and other job tenure rights, health insurance untied to the current employer, individualized wage-setting, and public income insurance systems that encourage mobility and risk-taking in the labor market.

Suggested Citation

  • Magnus Henrekson, 2020. "How labor market institutions affect job creation and productivity growth," IZA World of Labor, Institute of Labor Economics (IZA), pages 1-38, January.
    • Handle: RePEc:iza:izawol:journl:2020:n:38
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    References listed on IDEAS

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    1. Andrea Bassanini & Luca Nunziata & Danielle Venn, 2009. "Job protection legislation and productivity growth in OECD countries [Appropriate growth policy: a unifying framework]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 24(58), pages 349-402.
    2. Ricardo J. Caballero, 2007. "Specificity and the Macroeconomics of Restructuring," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262033623, April.
    3. Henrekson, Magnus & Johansson, Dan, 2008. "Competencies and Institutions Fostering High-growth Firms," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 5(1), pages 1-80, November.
    4. Amil Petrin & Jagadeesh Sivadasan, 2013. "Estimating Lost Output from Allocative Inefficiency, with an Application to Chile and Firing Costs," The Review of Economics and Statistics, MIT Press, vol. 95(1), pages 286-301, March.
    5. John Martin & Stefano Scarpetta, 2012. "Setting It Right: Employment Protection, Labour Reallocation and Productivity," De Economist, Springer, vol. 160(2), pages 89-116, June.
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    8. Magnus Henrekson & Dan Johansson & Mikael Stenkula, 2010. "Taxation, Labor Market Policy and High-Impact Entrepreneurship," Journal of Industry, Competition and Trade, Springer, vol. 10(3), pages 275-296, September.
    9. Per Skedinger, 2010. "Employment Protection Legislation," Books, Edward Elgar Publishing, number 13686.
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    Cited by:

    1. Bierut, Beata K. & Dybka, Piotr, 2021. "Increase versus transformation of exports through technological and institutional innovation: Evidence from Bayesian model averaging," Economic Modelling, Elsevier, vol. 99(C).
    2. Georgeanne M. Artz & Liesl Eathington & Jasmine Francois & Melvin Masinde & Peter F. Orazem, 2020. "Churning in Rural and Urban Retail Markets," The Review of Regional Studies, Southern Regional Science Association, vol. 50(1), pages 110-126.
    3. Pankaj C. Patel & Cornelius A. Rietveld, 2023. "Right of association and new business entry: country-level evidence from the market sector," Small Business Economics, Springer, vol. 61(3), pages 1161-1177, October.
    4. Claire Economidou & Luca Grilli & Magnus Henrekson & Mark Sanders, 2018. "Financial and Institutional Reforms for an Entrepreneurial Society," Small Business Economics, Springer, vol. 51(2), pages 279-291, August.
    5. Ang, James B. & Fredriksson, Per G., 2018. "Culture, legal heritage and the regulation of labor," Journal of Comparative Economics, Elsevier, vol. 46(2), pages 616-633.
    6. Niklas Elert & Magnus Henrekson, 2016. "Evasive entrepreneurship," Small Business Economics, Springer, vol. 47(1), pages 95-113, June.

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    More about this item

    Keywords

    entrepreneurship; gazelles; high-growth firms; innovation; labor market policy; productivity;
    All these keywords.

    JEL classification:

    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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