Human capital,employment protection and growth in Europe |
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| Institution: | 1. Brown University and Instituto de Economía, Facultad de Ciencias Económicas y de Administración, Universidad de la República, Uruguay;2. Leeds University Business School, IZA, and Instituto de Economía, Facultad de Ciencias Económicas y de Administración, Universidad de la República, Uruguay;3. Instituto de EconomÃa, Facultad de Ciencias Económicas y de Administración, Universidad de la República, Uruguay;1. Université Paris Dauphine, PSL Research University, CNRS UMR 7088, DRM, Place du Maréchal de Lattre de Tassigny 75016 Paris, France;2. Sciences Po - C.E.R.I. 56 Rue Jacob, 75006 Paris, France |
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| Abstract: | Using data for a large sample of manufacturing and service sectors in 14 EU countries, this paper shows that the value added and TFP growth rate differential between high and low human capital intensive industries is greater in countries with low than countries with high levels of employment protection legislation. We also find that such negative effect of EPL is slightly stronger for countries near the technology frontier, in the manufacturing sector and after the 1990s. We interpret these results suggesting that technology adoption depends on the skill level of the workforce and on the capacity of firms to adjust employment as technology changes: therefore, firing costs have a stronger impact in sectors where technical change is more skill-biased and technology adoption more important. |
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| Keywords: | Employment protection legislation Human capital Technology adoption Growth Sectors |
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