Labor Laws and Innovation

Acharya, V V and Baghai, R and Subramanian, K (2010) Labor Laws and Innovation. Working Paper. National Bureau of Economic Research. (Unpublished)

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Abstract

Stringent labor laws can provide firms a commitment device to not punish short-run failures and thereby spur their employees to pursue value-enhancing innovative activities. Using patents and citations as proxies for innovation, we identify this effect by exploiting the time-series variation generated by staggered country-level changes in dismissal laws. We find that within a country, innovation and economic growth are fostered by stringent laws governing dismissal of employees, especially in the more innovation-intensive sectors. Firm-level tests within the United States that exploit a discontinuity generated by the passage of the federal Worker Adjustment and Retraining Notification Act confirm the cross-country evidence.

Affiliation: Indian School of Business
ISB Creators:
ISB CreatorsORCiD
Subramanian, KUNSPECIFIED
Item Type: Monograph (Working Paper)
Uncontrolled Keywords: Employment termination, Labor law, Business innovation, Patents, Citation indexes, Case dismissal, Law firms, Gross domestic product, Rule of law
Subjects: Finance
Depositing User: Ilayaraja M
Date Deposited: 08 Jun 2019 20:04
Last Modified: 09 Jun 2019 19:17
URI: http://eprints.exchange.isb.edu/id/eprint/1050
Publisher URL: https://www.nber.org/papers/w16484
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