TY  - JOUR
AU  - Acharya,Viral V.
AU  - Baghai,Ramin P.
AU  - Subramanian,Krishnamurthy V.
TI  - Labor Laws and Innovation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16484
PY  - 2010
Y2  - October 2010
UR  - http://www.nber.org/papers/w16484
L1  - http://www.nber.org/papers/w16484.pdf
N1  - Author contact info:
Viral V. Acharya
Stern School of Business
New York University
44 West 4th Street, Suite 9-84
New York, NY 10012
Tel: 212/998-0354
Fax: 212 995 4233
E-Mail: vacharya@stern.nyu.edu

Ramin Baghai
Stockholm School of Economics 
E-Mail: ramin.baghai@hhs.se

Krishnamurthy Subramanian
Indian School of Business
Gachibowli
Hyderabad (A.P.)
India 500032
Tel: +91-40-2318-7169
E-Mail: kvsubramania@gmail.com
M2  - featured in NBER digest on 2011-04-01
AB  - 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.
ER  -