Rigidities in Employment Protection and Exporting

A large number of studies have shown that contribution of exporters to economic growth and development is much higher than non-exporting firms. This evidence has lead governments to improve their trade policies in order to increase foreign exposure of firms. However, improvements in trade policies can only be fully effective when they are complemented with other regulatory reforms that improve the investment climate for firms. This study focuses on a particular aspect of investment climate, namely employment protection legislation, and shows how these regulations discourage firms from exporting. Using a rich set of firm level data from 26 countries in the Eastern Europe and Central Asia region, the author shows that firms that cannot create new jobs due to restrictive labor regulations are less likely to export. Evidence shows that firms that plan to export expand their size before they start to export. However the rigidities in labor markets make this adjustment costly. Higher costs of labor decrease operating profits and lead to a higher threshold value of productivity required for entering export markets. As a result, a smaller fraction of firms chooses to export.

Bibliographic Details

Main Author:	Şeker, Murat
Language:	English
Published:	2010-05-01
Subjects:	ADJUSTMENT PROCESS, AGGREGATE GROWTH, AGGREGATE PRODUCTIVITY, AGGREGATE PRODUCTIVITY GROWTH, BUSINESS ENVIRONMENT, BUSINESS HOTELS, BUSINESS SERVICE, BUYERS, COMPETITIVENESS, COMPETITORS, CORRELATION MATRIX, CREATING JOBS, CREATIVE DESTRUCTION, CROSS-INDUSTRY ANALYSIS, CROSS-SECTIONAL DATA, CUSTOMS, DATA ANALYSIS, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMICS, EMPLOYEE, EMPLOYMENT, EMPLOYMENT GROWTH, EMPLOYMENT GROWTH RATE, EMPLOYMENT LEVEL, EMPLOYMENT LEVELS, EMPLOYMENT PROTECTION LEGISLATION, EMPLOYMENT RELATIONSHIP, ENTERPRISE SURVEYS, EQUIPMENT, EXISTING WORKFORCE, EXPORT MARKET, EXPORT MARKETS, FINANCIAL INSTITUTIONS, FINANCIAL SERVICES, FIRING COSTS, FIRM LEVEL, FIRM PERFORMANCE, FIRM SIZE, FIRM TURNOVER, FLEXIBLE LABOR MARKETS, FOREIGN DIRECT INVESTMENT, FOREIGN MARKETS, FOREIGN OWNERSHIP, GENERAL EQUILIBRIUM, GLOBAL ECONOMY, GOVERNMENT SERVICES, INDUSTRY PRODUCTIVITY, INNOVATION, INNOVATIONS, INSPECTIONS, INTERNATIONAL MARKETS, INTERNATIONAL TRADE, JOB CREATION, JOB CREATION RATE, JOB CREATION RATES, JOB DESTRUCTION, JOB DESTRUCTION RATES, JOB FLOWS, JOB SECURITY, JOBS, LABOR ADJUSTMENT, LABOR DEMAND, LABOR LAWS, LABOR MARKET, LABOR MARKET FLEXIBILITY, LABOR MARKET INSTITUTIONS, LABOR MARKET REFORMS, LABOR MARKET RIGIDITIES, LABOR MARKETS, LABOR PRODUCTIVITY, LABOR PRODUCTIVITY GROWTH, LABOR REALLOCATION, LABOR REGULATION, LABOR REGULATIONS, MANUFACTURERS, MANUFACTURING, MANUFACTURING INDUSTRIES, MANUFACTURING INDUSTRY, MARKET ENTRY, MULTI-PLANT FIRM, MULTI-PLANT FIRMS, NET JOB CREATION, NEW MARKETS, NEW TECHNOLOGIES, PERMANENT WORKERS, PRIVATE SECTOR, PROBIT REGRESSIONS, PRODUCT MARKET, PRODUCT MARKET REGULATION, PRODUCTION WORKERS, PRODUCTIVITIES, PRODUCTIVITY LEVELS, PUBLIC SERVICES, R&D, REGULATORY REFORMS, RESULT, RESULTS, RETAIL TRADE, ROBUSTNESS ANALYSIS, SEARCH, SEARCHES, SECURITY SERVICES, SENSITIVITY ANALYSIS, SERVICE SECTOR, SERVICE SECTORS, SEVERANCE PAYMENTS, SMALL FIRMS, SURVIVAL RATE, SURVIVAL RATES, TARGETS, TELECOMMUNICATIONS, TEMPORARY WORKERS, TOTAL EMPLOYMENT, TOTAL FACTOR PRODUCTIVITY, TRADE REFORMS, UNEMPLOYMENT, USES, WAGE BARGAINING, WAGE RATE, WAGE RATES, WAGES, WEB, WORKER, WORKERS, WORLD TRADE,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100510115506 https://hdl.handle.net/10986/3788
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