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The Effects of Employment Protection on the Choice of Risky Projects

Author

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  • Glazer, A.
  • Kanniainen, V.

Abstract

We consider a firm that is subject to employment protection laws that limit the firm's ability to fire labor. In particular, we suppose that though a firm which shuts down can fire all its workers, it may fire no fewer. Compared to a firm that is subject to no employment protection, a firm constrained in firing will prefer a risk-free project over a risky one, but may prefer the riskier of two risky projects.

Suggested Citation

  • Glazer, A. & Kanniainen, V., 2000. "The Effects of Employment Protection on the Choice of Risky Projects," University of Helsinki, Department of Economics 487, Department of Economics.
    • Handle: RePEc:fth:helsec:487
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    References listed on IDEAS

    as
    1. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
    2. Bentolila, S. & Saint-Paul, G., 1995. "A model of labour demand with linear adjustment costs," Labour Economics, Elsevier, vol. 2(1), pages 105-105, March.
    3. Saint-Paul, Gilles, 2002. "Employment protection, international specialization, and innovation," European Economic Review, Elsevier, vol. 46(2), pages 375-395, February.
    4. Risager, Ole & Sorensen, Jan Rose, 1997. "On the effects of firing costs when investment is endogenous: An extension of a model by Bertola," European Economic Review, Elsevier, vol. 41(7), pages 1343-1353, July.
    5. Glazer, A. & Kanniainen, V., 2000. "Term Length and the Quality of Appointments," University of Helsinki, Department of Economics 485, Department of Economics.
    6. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Sebastian G. Kessing, 2006. "Employment Protection and Product Market Competition," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(2), pages 339-352, July.
    2. Lukach, R. & Plasmans, J.E.J., 2002. "Measuring Knowledge Spillovers using Patent Citations : Evidence from the Belgian Firm's Data," Other publications TiSEM d78bf59a-e0ff-4451-86b9-1, Tilburg University, School of Economics and Management.
    3. Raquel Fonseca Benito & Natalia Utrero, 2007. "Employment Protection Laws, Barriers to Entrepreneurship, Financial Markets and Firm Size," Working Papers WR-454, RAND Corporation.
    4. Raquel Fonseca Benito & Natalia Utrero, 2007. "Employment Protection Laws, Barriers to Entrepreneurship, Financial Markets and Firm Size," Working Papers 454, RAND Corporation.

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    More about this item

    Keywords

    LABOUR ; PROTECTIONISM ; RISK;
    All these keywords.

    JEL classification:

    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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