We analyze the effect of a labor market reform on firms’ product innovation. The reform, which amounts to a natural experiment, differentially reduced firing costs for some firms, thereby lowering adjustment costs in the presence of demand uncertainty. Using a difference-in-differences framework, we show that the reform increased product innovations. We also provide evidence that the reform induced upgrading of product quality and enabled firms to grow faster and enter new markets. The effects are concentrated in industries with high levels of demand volatility and R&D intensity, where flexible adjustments to unexpected shocks are important.

中文翻译：

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劳动力市场改革与创新：来自西班牙的证据

我们分析了劳动力市场改革对企业产品创新的影响。这项改革相当于一项自然实验，对一些公司的解雇成本有所不同，从而在存在需求不确定性的情况下降低了调整成本。使用差异差异框架，我们证明了这项改革促进了产品创新。我们还提供了证据，表明改革引发了产品质量的提升，并使企业能够更快地成长并进入新市场。影响主要集中在需求波动性和研发强度较高的行业中，在这些行业中，灵活调整意外冲击非常重要。