Working Paper
The Effects of Employment Protection on the Choice of Risky Projects
Amihai Glazer, Vesa Kanniainen
CESifo, Munich, 2002
CESifo Working Paper No. 689
CESifo, Munich, 2002
CESifo Working Paper No. 689
We consider a firm that is subject to employment protection laws that limit the firm‘s ability to fire labor. In particular, we suppose that though a firm which shuts down can fire all its workers, it may fire no fewer. Compared to a firm that is subject to no employment protection, a firm constrained in firing will prefer a risk-free project over a risky one, but may prefer the riskier of two risky projects.
Keywords: project choice, labor protection