This paper tests the hypothesis that employment protection legislation (EPL) increases the incentives of firms to train their employees. The identification strategy uses a regression discontinuity design (RDD) that exploits exemptions of small firms from EPL. Using firm-level data from Finland...

Laws on hiring and firing are intended to protect workers from unfair behavior by employers, to counter imperfections in financial markets that limit workers' ability to insure themselves against job loss, and to preserve firm-specific human capital. But by imposing costs on firms' adaptation to...