Belfer Center Home > Publications > Academic Papers & Reports > Working Papers > Labor Regulations and European Industrial Specialization: Evidence from Private Equity Investments

EmailEmail   PrintPrint Bookmark and Share


"Labor Regulations and European Industrial Specialization: Evidence from Private Equity Investments"

Working Paper

May 2008

Authors: Ant Bozkaya, Former Research Fellow, International Security Program, 2008–2009; Science, Technology, and Public Policy Program, 2005–2009; Dubai Initiative, 2007–2008, William Kerr

Belfer Center Programs or Projects: Science, Technology, and Public Policy; Dubai Initiative


European nations empirically substitute between employment protection regulations and labor market expenditures like unemployment insurance benefits in the provision of labor market insurance to workers. While perhaps substitutes from a worker's perspective, employment regulations more directly tax firms making frequent labor force adjustments. These labor adjustments are especially important for the portfolio companies of both venture capital and buy-out investors. European nations providing worker insurance through labor market expenditures developed stronger domestic private equity markets over the 1990-2004 period than those nations favoring employment protection. These patterns are further evident in US-sourced private equity investments into Europe. Moreover, tests for industry specialization suggest that countries with more flexible labor markets tend to specialize in sectors characterized by high labor volatility. These results are relevant to the literature examining the impact of labor market regulations on entrepreneurship and productivity growth due to reallocation across firms and sectors.

Click here for the full text.


For more information about this publication please contact the The Dubai Initiative at 617-496-3694.

For Academic Citation:

Bozkaya, Ant and William R. Kerr. "Labor Regulations and European Industrial Specialization: Evidence from Private Equity Investments." Working Paper, Dubai Initiative, Belfer Center for Science and International Affairs, Harvard Kennedy School, May 2008.

Bookmark and Share

See more research from Harvard Kennedy School faculty members by visiting the working paper series on the Kennedy School website.

Events Calendar

We host a busy schedule of events throughout the fall, winter and spring. Past guests include: UN Secretary-General Ban Ki-moon, former Vice President Al Gore, and former Soviet Union President Mikhail Gorbachev.