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Labour Market Regulations and Capital Intensity

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  • Jimmy Lopez

    (DGEI-DEMS - Banque de France - Direction Générale des Etudes et des relations Internationales, Direction des Etudes Microéconomique et Structurelles, LEDi - Laboratoire d'Economie de Dijon [Dijon] - UB - Université de Bourgogne - UBFC - Université Bourgogne Franche-Comté [COMUE])

  • Jacques Mairesse

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique)

  • Cette Gilbert

    (Centre de recherche de la Banque de France - Banque de France)

Abstract

On the basis of a country*industry unbalanced panel data sample for 14 OECD countries and 18 industries covering the years 1988 to 2007, this study proposes an econometric investigation of the effects of the OECD Employment Protection Legislation (EPL) indicator on capital intensity for four capital components, and on the share of employment for two skill components. Our results relying on a difference-in-difference approach are the following: i) positive and significant effects for non-ICT physical capital intensity and the share of high-skilled employment; ii) non-significant effects for ICT capital intensity; and (iii) negative and significant effects for R&D capital intensity and the share of low-skilled employment. These results suggest that firms consider that the strengthening of Employment Protection Legislation is equivalent to a rise in the cost of labor, resulting in capital-to-labor substitution in favor of non-ICT capital and working at the disadvantage of low-skill relatively to high-skill workers. They indicate to the contrary that structural reforms for more labor flexibility weakening this legislation could have a favorable impact on firms’ R&D investment and their hiring of low-skill workers.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Jimmy Lopez & Jacques Mairesse & Cette Gilbert, 2018. "Labour Market Regulations and Capital Intensity," Post-Print hal-02197392, HAL.
    • Handle: RePEc:hal:journl:hal-02197392
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    References listed on IDEAS

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    Cited by:

    1. Balázs Égert, 2018. "Regulation, Institutions and Aggregate Investment: New Evidence from OECD Countries," Open Economies Review, Springer, vol. 29(2), pages 415-449, April.
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    3. Philippe Aghion & Antonin Bergeaud & John Van Reenen, 2023. "The Impact of Regulation on Innovation," American Economic Review, American Economic Association, vol. 113(11), pages 2894-2936, November.
    4. Oliver Kovacs, 2022. "Inclusive Industry 4.0 in Europe—Japanese Lessons on Socially Responsible Industry 4.0," Social Sciences, MDPI, vol. 11(1), pages 1-26, January.
    5. Balázs Égert, 2021. "Investment in OECD Countries: a Primer," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 63(2), pages 200-223, June.
    6. Kovács, Olivér, 2017. "Az ipar 4.0 komplexitása - I [The complexity of industry 4.0 - Part 1]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 823-851.
    7. Kim, Eun-Hee & Kim, Yeonbae, 2023. "Can innovation be induced by state involvement in the market? Evidence within an expanded framework of Hall & Soskice (2001)," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 264-284.
    8. Giordano, Claire & Marinucci, Marco & Silvestrini, Andrea, 2019. "The macro determinants of firms' and households' investment: Evidence from Italy," Economic Modelling, Elsevier, vol. 78(C), pages 118-133.
    9. Oliver Kovacs, 2019. "Big IFs in Productivity-Enhancing Industry 4.0," Social Sciences, MDPI, vol. 8(2), pages 1-17, January.
    10. Gilbert Cette & Jimmy Lopez & Jacques Mairesse, 2018. "Rent Creation and Sharing: New Measures and Impactson TFP," NBER Working Papers 24426, National Bureau of Economic Research, Inc.
    11. Kovács, Olivér, 2017. "Az ipar 4.0 komplexitása - II [The Complexity of Industry 4.0 - Part 2]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 970-987.
    12. Michael Mitsopoulos, 2017. "Overtaxation of Private Sector Salaried Employment as a Key Impediment to the Recovery of Greece," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Dimitrios D. Thomakos & Konstantinos I. Nikolopoulos (ed.), Taxation in Crisis, chapter 12, pages 289-336, Palgrave Macmillan.
    13. Balázs Égert, 2017. "The quantification of structural reforms: Extending the framework to emerging market economies," OECD Economics Department Working Papers 1442, OECD Publishing.
    14. Michael MITSOPOULOS & Theodore PELAGIDIS, 2021. "Labor Taxation And Investment In Developed Countries. The Impact On Employment," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 13-31, June.
    15. Anderton, Robert & Jarvis, Valerie & Labhard, Vincent & Morgan, Julian & Petroulakis, Filippos & Vivian, Lara, 2020. "Virtually everywhere? Digitalisation and the euro area and EU economies," Occasional Paper Series 244, European Central Bank.
    16. Giorgio Presidente, 2023. "Institutions, Holdup, and Automation," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 32(4), pages 831-847.
    17. Thum-Thysen, Anna & Voigt, Peter & Bilbao-Osorio, Beñat & Maier, Christoph & Ognyanova, Diana, 2019. "Investment dynamics in Europe: Distinct drivers and barriers for investing in intangible versus tangible assets?," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 77-88.
    18. Olivér Kovács, 2022. "Zombification and Industry 4.0—Directional Financialisation against Doomed Industrial Revolution," Social Sciences, MDPI, vol. 11(5), pages 1-24, May.
    19. Mr. Adrian Peralta & Agustin Roitman, 2018. "Technology and the Future of Work," IMF Working Papers 2018/207, International Monetary Fund.
    20. Doerr, Sebastian & Raissi, Mehdi & Weber, Anke, 2018. "Credit-supply shocks and firm productivity in Italy," Journal of International Money and Finance, Elsevier, vol. 87(C), pages 155-171.
    21. Calcagnini, Giorgio & Giombini, Germana & Travaglini, Giuseppe, 2019. "A theoretical model of imperfect markets and investment," Structural Change and Economic Dynamics, Elsevier, vol. 50(C), pages 237-244.
    22. Kovacs, Oliver, 2018. "The dark corners of industry 4.0 – Grounding economic governance 2.0," Technology in Society, Elsevier, vol. 55(C), pages 140-145.
    23. Gilbert Cette & Jimmy Lopez & Jacques Mairesse, 2019. "Rent Creation And Rent Sharing: New Measures And Impacts On Total Factor Productivity," Economic Inquiry, Western Economic Association International, vol. 57(4), pages 1915-1938, October.
    24. Sondermann, David & Consolo, Agostino & Gunnella, Vanessa & Koester, Gerrit & Lambrias, Kyriacos & Lopez-Garcia, Paloma & Nerlich, Carolin & Petroulakis, Filippos & Saiz, Lorena & Serafini, Roberta, 2019. "Economic structures 20 years into the euro," Occasional Paper Series 224, European Central Bank.

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    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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