Employment Protection Laws and Privatization

35 Pages Posted: 18 Mar 2012 Last revised: 27 Dec 2017

See all articles by Krishnamurthy Subramanian

Krishnamurthy Subramanian

Indian School of Business (ISB), Hyderabad

William L. Megginson

University of Oklahoma

Multiple version iconThere are 2 versions of this paper

Date Written: December 26, 2017

Abstract

Is privatization in a country related to the stringency of its employment protection laws (EPL) – and, if so, how? We address this question using privatization deals in fourteen European countries over three decades and all the changes in EPL within a country. Using traditional difference-in-difference tests exploiting major changes and generalized difference-in-difference tests for the entire sample, we find that stringent EPL discourage privatization in a country. For identification, we use two sets of triple-difference tests that control for all country-level omitted variables using fixed effects for each (country, year) pair. First, using cross-sectional differences across industries within a country, we find that the effect of EPL on privatization is disproportionately greater in industries where separation rates and relocation rates are higher. Second, using productivity measures for U.S. industries as an instrument, we find that the effect of EPL on privatization is disproportionately more in less productive industries.

Keywords: Employment protection, labor laws, privatization

JEL Classification: G15, G38, J8, K31, L33

Suggested Citation

Subramanian, Krishnamurthy and Megginson, William L., Employment Protection Laws and Privatization (December 26, 2017). Journal of Law and Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2024087 or http://dx.doi.org/10.2139/ssrn.2024087

Krishnamurthy Subramanian

Indian School of Business (ISB), Hyderabad ( email )

Hyderabad, Gachibowli 500 019
India

William L. Megginson (Contact Author)

University of Oklahoma ( email )

307 W Brooks, 205A Adams Hall
Norman, OK 73019
United States
(405) 325-2058 (Phone)
(405) 325-1957 (Fax)

HOME PAGE: http://faculty-staff.ou.edu/M/William.L.Megginson-

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