|This centre is a member of The LSE Research Laboratory [RLAB]: CASE | CVER | CEP | SERC | STICERD||Cookies?|
Paper No' CEPDP1128: | Full paper
Download zipped data files associated with this paper.
Save Reference as: BibTeX File | EndNote Import File
Keywords: Firm size; productivity, labor regulation, power law
JEL Classification: L11; L51; J8; L25.6
Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: CEP Discussion Papers
Share this page: Google Bookmarks | Facebook | Twitter
Abstract:We show how size-contingent laws can be used to identify the equilibrium and welfare effects of labor regulation. Our framework incorporates such regulations into the Lucas (1978) model and applies it to France where many labor laws start to bind on firms with 50 or more employees. Using population date on firms between 1995 and 2007, we structurally estimate the key parameters of our model to construct counterfactual size, productivity and welfare distributions. We find that the cost of these regulations is equivalent to that of a 2.3% variable tax on labor. In our baseline case with French levels of partial real wage inflexibility welfare costs of the regulations are 3.4% of GDP (falling to 1.3% if real wages were perfectly flexible downwards). The main losers from the regulation are workers – and to a lesser extent, large firms – and the main winners are small firms.
Copyright © RLAB & LSE 2003 - 2017 | LSE, Houghton Street, London WC2A 2AE | Contact: RLAB | Site updated 23 May 2017