Theoretical and empirical models provide ambiguous responses on the relationship between labor market regulation, innovation and investment. On the one hand, labor market regulation increases firms' adjustment costs and, ceteris paribus, decreases investment. But, on the other, it also stimulates firms to invest, innovate, increase productivity and profit in the long run. In this paper we present an endogenous growth model that describes the role of these opposite forces, and why a stricter labor market regulation may positively affect innovation and investment in the long run. Most of the theoretical and empirical results hold for Italy, Germany, France, and Spain.
A Schumpeterian model of investment and innovation with labor market regulation
CALCAGNINI, GIORGIO;GIOMBINI, GERMANA;TRAVAGLINI, GIUSEPPE
2018
Abstract
Theoretical and empirical models provide ambiguous responses on the relationship between labor market regulation, innovation and investment. On the one hand, labor market regulation increases firms' adjustment costs and, ceteris paribus, decreases investment. But, on the other, it also stimulates firms to invest, innovate, increase productivity and profit in the long run. In this paper we present an endogenous growth model that describes the role of these opposite forces, and why a stricter labor market regulation may positively affect innovation and investment in the long run. Most of the theoretical and empirical results hold for Italy, Germany, France, and Spain.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
