Effects of Employment protection legislation on the ability to downsize: Firms in weaker position are most affected?

Abstract

The research on downsizing has focused either on the causes or on the effects of downsizing on firms’ performance. This paper empirically investigates how the interaction between increasing employment protection legislation (EPL) and firms’ attributes affects downsizing decisions, our hypothesis are founded in the fact that the negative effect of EPL in downsizing can be attenuated or enhanced in the presence of heterogeneous attributes of firms