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When structural reforms of labor markets harm productivity. Evidence from the German IAB panel

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  • Sergei Hoxha
  • Alfred Kleinknecht

Abstract

We find firm-level evidence that removing labor market rigidities can harm productivity growth. This holds, in particular, in industries with a high ‘cumulativeness’ of knowledge, i.e., when accumulation of worker-embodied (and often ‘tacit’) knowledge from experience is important for innovative competencies. We conclude that there is a trade-off between the efficient allocation of scarce resources in a static neoclassical perspective and dynamic Schumpeterian efficiency, the latter requiring rigidities in labor markets that are valuable for innovation.

Suggested Citation

  • Sergei Hoxha & Alfred Kleinknecht, 2024. "When structural reforms of labor markets harm productivity. Evidence from the German IAB panel," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 33(3), pages 541-554.
    • Handle: RePEc:oup:indcch:v:33:y:2024:i:3:p:541-554.
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