Resource title

Collective Dismissal Cost, Product Market Competition and Innovation

Resource image

image for OpenScout resource :: Collective Dismissal Cost, Product Market Competition and Innovation

Resource description

Collective dismissal costs are an important part of employment protection legislation (EPL) and make firms' exit more costly. We show in a model with step-by-step innovations that dismissal costs spur innovation if product markets are not too competitive: technologically more advanced firms endogenously exit with smaller probability so that there is a dynamic incentive to innovate. But dismissal costs decrease the absolute value of firms and induce exit. These opposite effects and their dependence on the policy mix of EPL and product market regulation explain why empirical studies have difficulties to find a negative effect of EPL on innovation.

Resource author

Winfried Koeniger

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/20127

Resource license

Adapt according to the presented license agreement and reference the original author.