Şeker, Murat2012-03-192012-03-192010-05-01https://hdl.handle.net/10986/3788A large number of studies have shown that contribution of exporters to economic growth and development is much higher than non-exporting firms. This evidence has lead governments to improve their trade policies in order to increase foreign exposure of firms. However, improvements in trade policies can only be fully effective when they are complemented with other regulatory reforms that improve the investment climate for firms. This study focuses on a particular aspect of investment climate, namely employment protection legislation, and shows how these regulations discourage firms from exporting. Using a rich set of firm level data from 26 countries in the Eastern Europe and Central Asia region, the author shows that firms that cannot create new jobs due to restrictive labor regulations are less likely to export. Evidence shows that firms that plan to export expand their size before they start to export. However the rigidities in labor markets make this adjustment costly. Higher costs of labor decrease operating profits and lead to a higher threshold value of productivity required for entering export markets. As a result, a smaller fraction of firms chooses to export.CC BY 3.0 IGOADJUSTMENT PROCESSAGGREGATE GROWTHAGGREGATE PRODUCTIVITYAGGREGATE PRODUCTIVITY GROWTHBUSINESS ENVIRONMENTBUSINESS HOTELSBUSINESS SERVICEBUYERSCOMPETITIVENESSCOMPETITORSCORRELATION MATRIXCREATING JOBSCREATIVE DESTRUCTIONCROSS-INDUSTRY ANALYSISCROSS-SECTIONAL DATACUSTOMSDATA ANALYSISECONOMIC DEVELOPMENTECONOMIC GROWTHECONOMICSEMPLOYEEEMPLOYMENTEMPLOYMENT GROWTHEMPLOYMENT GROWTH RATEEMPLOYMENT LEVELEMPLOYMENT LEVELSEMPLOYMENT PROTECTION LEGISLATIONEMPLOYMENT RELATIONSHIPENTERPRISE SURVEYSEQUIPMENTEXISTING WORKFORCEEXPORT MARKETEXPORT MARKETSFINANCIAL INSTITUTIONSFINANCIAL SERVICESFIRING COSTSFIRM LEVELFIRM PERFORMANCEFIRM SIZEFIRM TURNOVERFLEXIBLE LABOR MARKETSFOREIGN DIRECT INVESTMENTFOREIGN MARKETSFOREIGN OWNERSHIPGENERAL EQUILIBRIUMGLOBAL ECONOMYGOVERNMENT SERVICESINDUSTRY PRODUCTIVITYINNOVATIONINNOVATIONSINSPECTIONSINTERNATIONAL MARKETSINTERNATIONAL TRADEJOB CREATIONJOB CREATION RATEJOB CREATION RATESJOB DESTRUCTIONJOB DESTRUCTION RATESJOB FLOWSJOB SECURITYJOBSLABOR ADJUSTMENTLABOR DEMANDLABOR LAWSLABOR MARKETLABOR MARKET FLEXIBILITYLABOR MARKET INSTITUTIONSLABOR MARKET REFORMSLABOR MARKET RIGIDITIESLABOR MARKETSLABOR PRODUCTIVITYLABOR PRODUCTIVITY GROWTHLABOR REALLOCATIONLABOR REGULATIONLABOR REGULATIONSMANUFACTURERSMANUFACTURINGMANUFACTURING INDUSTRIESMANUFACTURING INDUSTRYMARKET ENTRYMULTI-PLANT FIRMMULTI-PLANT FIRMSNET JOB CREATIONNEW MARKETSNEW TECHNOLOGIESPERMANENT WORKERSPRIVATE SECTORPROBIT REGRESSIONSPRODUCT MARKETPRODUCT MARKET REGULATIONPRODUCTION WORKERSPRODUCTIVITIESPRODUCTIVITY LEVELSPUBLIC SERVICESR&DREGULATORY REFORMSRESULTRESULTSRETAIL TRADEROBUSTNESS ANALYSISSEARCHSEARCHESSECURITY SERVICESSENSITIVITY ANALYSISSERVICE SECTORSERVICE SECTORSSEVERANCE PAYMENTSSMALL FIRMSSURVIVAL RATESURVIVAL RATESTARGETSTELECOMMUNICATIONSTEMPORARY WORKERSTOTAL EMPLOYMENTTOTAL FACTOR PRODUCTIVITYTRADE REFORMSUNEMPLOYMENTUSESWAGE BARGAININGWAGE RATEWAGE RATESWAGESWEBWORKERWORKERSWORLD TRADEWorld Bank10.1596/1813-9450-5303