TY  - RPRT
        AU  - Koeniger, Winfried
        TI  - Collective Dismissal Cost, Product Market Competition and Innovation
        PY  - 2003/Oct/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 888
        UR  - https://www.iza.org/index.php/publications/dp888
        AB  - 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.
        KW  - Schumpeterian growth
KW  - employment protection legislation
KW  - step-by-step innovations
KW  - exit cost
        ER  -