Employment protection and high-tech aversion |
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| Institution: | 1. Management and Organization, School of Business and Economics, Vrije Universiteit Amsterdam, Amsterdam, The Netherlands;2. Jindal School of Management, University of Texas at Dallas, Richardson, TX, USA;1. Department of Economics, University Carlos III Madrid, Spain;2. Department of Economics, University of Huelva, Spain;3. Panteia/EIM, Zoetermeer, The Netherlands;1. University of Würzburg, Germany;2. Chemnitz University of Technology, Germany |
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| Abstract: | Do institutional firing costs slow the diffusion of information and communications technology (ICT)? The paper develops a model in which, as the technology at a given plant drops behind the best practice, it optimally reduces its workforce. As a result, firing costs are particularly detrimental to profits in industries in which the rate of technical change is rapid—such as ICT—and countries with high firing costs specialize in industries in which technical change is sluggish. The paper suggests that industry composition is a new channel through which labor market regulation might impact macroeconomic aggregates. |
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