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Title:Employment protection legislation, multinational firms and innovation PDF Logo
Authors:Griffith, Rachel
Macartney, Gareth
Issue Date:2010
Series/Report no.:IFS working papers 10,01
Abstract:The theoretical effects of labour regulations such as employment protection legislation (EPL) on innovation is ambiguous, and empirical evidence has thus far been inconclusive. EPL increases job security and the greater enforceability of job contracts may increase worker investment in innovative activity. On the other hand EPL increases adjustment costs faced by firms, and this may lead to under-investment in activities that are likely to require adjustment, including technologically advanced innovation. In this paper we find empirical evidence that both effects are at work - multinational enterprises locate more innovative activity in countries with high EPL, however they locate more technologically advanced innovation in countries with low EPL.
Subjects:Innovation
employment protection
multinational firm location
JEL:D21
F23
O31
J24
Document Type:Working Paper
Appears in Collections:IFS Working Papers, Institute for Fiscal Studies (IFS)

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