IDEAS home Printed from https://ideas.repec.org/p/eti/dpaper/24022.html
   My bibliography  Save this paper

Unleashing Innovation and Entrepreneurship: Ripple effects of employment protection reforms

Author

Listed:
  • KATAGIRI Mitsuru

Abstract

This study investigates the effects of employment protection legislation (EPL) on entrepreneurship, firm dynamics, and economic growth in a general equilibrium model that incorporates endogenous Schumpeterian growth. The model implies that more stringent EPL encourages households to accumulate more firm-specific human capital, which raises the opportunity cost to start a business. Using Japanese firm- and household-level microdata to calibrate parameter values, the quantitative exercise reveals that EPL reform aimed at its elimination could stimulate entrepreneurship in the household sector, thus boosting economic growth through more creative destruction in the firm sector. A partial equilibrium model that disregards the general equilibrium effects can overestimate or underestimate the policy effects of the EPL reform on entrepreneurship and economic growth. Policies that directly support firm entries or incumbents' research-and-development investment have limited impacts on economic growth as long as stringent EPL exists.

Suggested Citation

  • KATAGIRI Mitsuru, 2024. "Unleashing Innovation and Entrepreneurship: Ripple effects of employment protection reforms," Discussion papers 24022, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:24022
    as

    Download full text from publisher

    File URL: https://www.rieti.go.jp/jp/publications/dp/24e022.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Haltiwanger, John & Scarpetta, Stefano & Schweiger, Helena, 2014. "Cross country differences in job reallocation: The role of industry, firm size and regulations," Labour Economics, Elsevier, vol. 26(C), pages 11-25.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eve Caroli & Mathilde Godard, 2016. "Does job insecurity deteriorate health?," Health Economics, John Wiley & Sons, Ltd., vol. 25(2), pages 131-147, February.
    2. Jörn H. Block & Christian O. Fisch & James Lau & Martin Obschonka & André Presse, 2019. "How Do Labor Market Institutions Influence the Preference to Work in Family Firms? A Multilevel Analysis Across 40 Countries," Entrepreneurship Theory and Practice, , vol. 43(6), pages 1067-1093, November.
    3. repec:dau:papers:123456789/13646 is not listed on IDEAS
    4. Bottasso, Anna & Conti, Maurizio & Sulis, Giovanni, 2017. "Firm dynamics and employment protection: Evidence from sectoral data," Labour Economics, Elsevier, vol. 48(C), pages 35-53.
    5. Filippo Biondi & Sergio Inferrera & Matthias Mertens & Javier Miranda, 2023. "Declining Business Dynamism in Europe: The Role of Shocks, Market Power, and Technology," Jena Economics Research Papers 2023-011, Friedrich-Schiller-University Jena.
    6. Cette, Gilbert & Fernald, John & Mojon, Benoît, 2016. "The pre-Great Recession slowdown in productivity," European Economic Review, Elsevier, vol. 88(C), pages 3-20.
    7. Bendicta Marzinotto & Ladislav Wintr, 2019. "Employment protection and firm-level job reallocation: Adjusting for coverage," BCL working papers 131, Central Bank of Luxembourg.
    8. A. Arrighetti & F. Landini, 2018. "Eterogeneità delle imprese e stagnazione del capitalismo italiano," Economics Department Working Papers 2018-EP01, Department of Economics, Parma University (Italy).
    9. Chiara Criscuolo & Peter N. Gal & Carlo Menon, 2014. "The Dynamics of Employment Growth: New Evidence from 18 Countries," CEP Discussion Papers dp1274, Centre for Economic Performance, LSE.
    10. Giuseppina Gianfreda & Giovanna Vallanti, 2020. "Labor Courts and Firing Costs: The Labor‐Market Effects of Trial Delays," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 59(1), pages 40-84, January.
    11. Hijzen, Alexander & Mondauto, Leopoldo & Scarpetta, Stefano, 2017. "The impact of employment protection on temporary employment: Evidence from a regression discontinuity design," Labour Economics, Elsevier, vol. 46(C), pages 64-76.
    12. Masuch, Klaus & Anderton, Robert & Setzer, Ralph & Benalal, Nicholai, 2018. "Structural policies in the euro area," Occasional Paper Series 210, European Central Bank.
    13. Elisa Gamberoni & Claire Giordano & Paloma Lopez-Garcia, 2016. "Capital and labour (mis)allocation in the euro area: Some stylized facts and determinants," Questioni di Economia e Finanza (Occasional Papers) 349, Bank of Italy, Economic Research and International Relations Area.
    14. Camille Signoretto & Julie Valentin, 2019. "Individual dismissals for personal and economic reasons in French firms: One or two models?," European Journal of Law and Economics, Springer, vol. 48(2), pages 241-265, October.
    15. Cahuc, Pierre & Palladino, Marco G., 2024. "Employment Protection Legislation and Job Reallocation across Sectors, Firms and Workers: A Survey," IZA Discussion Papers 16747, Institute of Labor Economics (IZA).
    16. Gert Bijnens & Jozef Konings, 2020. "Declining business dynamism in Belgium," Small Business Economics, Springer, vol. 54(4), pages 1201-1239, April.
    17. Diwan, Ishac & Jamal Ibrahim Haidar, "undated". "Do Political Connections Reduce Job Creation? Evidence from Lebanon," Working Paper 414186, Harvard University OpenScholar.
    18. Leung, Woon Sau & Mazouz, Khelifa & Chen, Jie & Wood, Geoffrey, 2018. "Organization capital, labor market flexibility, and stock returns around the world," Journal of Banking & Finance, Elsevier, vol. 89(C), pages 150-168.
    19. Sun, Xuan Sean & Habib, Ahsan & Bhuiyan, Md. Borhan Uddin, 2020. "Workforce environment and audit fees: International evidence," Journal of Contemporary Accounting and Economics, Elsevier, vol. 16(1).
    20. Luz A. Flórez & Leonardo Fabio Morales & Daniel Medina & José Lobo, 2021. "Labor flows across firm size, age, and economic sector in Colombia vs. the United States," Small Business Economics, Springer, vol. 57(3), pages 1569-1600, October.
    21. Juli?n Messina & Anna Sanz-de-Galdeano, 2014. "Wage Rigidity and Disinflation in Emerging Countries," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(1), pages 102-133, January.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eti:dpaper:24022. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: TANIMOTO, Toko (email available below). General contact details of provider: https://edirc.repec.org/data/rietijp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.