Working Paper

Employment Protection and Firm Relocation: Theory and Evidence

Kiel Working Papers, 2102

We examine the determinants of the decision to relocate activities abroad for firms located in OECD countries. We argue that particular firm-specific features play a crucial role for the link between employment protection and relocation. Stricter employment protection laws in the current production location discourage firms’ relocation abroad. While larger, more productive firms and firms with higher labour intensities have, ceteris paribus, higher propensities to relocate, they also face higher exit barriers if the country from which they consider relocating has strict employment protection laws. Our predictions are supported empirically, using firm level data for 28 OECD countries.

Authors

Gerda Dewit
Yama Temouri

Info

Publication Date
JEL Classification
F23, L23, J88