Employment Labor Protection and Innovation

Abstract

Employment labor protection (ELP) has recently been a focus of policy formation, in particular in respect to its impact on the incentives for firms to invest in productivity enhancing innovation and growth. Yet, the true relationship is still unclear, and the debate is ongoing. Thus, the main objective of this study is to examine the relationship between strict employment rights and new radical innovations in the Organization for Economic Co-operation and Development (OECD) countries for the period from 2006 to 2014. The study employed the between estimator (BE) of panel data analysis and found that strict employment rights and interest rates are negatively correlated with new radical innovation in the country.