Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/226182
Authors: 
García-Vega, María
Kneller, Richard
Stiebale, Joel
Year of Publication: 
2020
Series/Report no.: 
DICE Discussion Paper 355
Abstract: 
We analyze the effect of a labor market reform on firms' product innovation. The re- form, which amounts to a natural experiment, differentially reduced firing costs for some firms, thereby lowering adjustment costs in the presence of demand uncertainty. Using a difference-in- differences framework, we show that the reform increased product innovations. We also provide evidence that the reform induced upgrading of product quality and enabled firms to grow faster and enter new markets. The effects are concentrated in industries with high levels of demand volatility and R&D intensity, where exible adjustments to unexpected shocks are important.
Subjects: 
Innovation
New products
Productivity
Labor market reform
EPL
JEL: 
D22
J3
O31
G31
ISBN: 
978-3-86304-354-4
Document Type: 
Working Paper

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