Firms and the Welfare State: A Test of Employer Support for Economic Security

Abstract

During the 20th century, Western nations have adopted social protection as a way to stem conflict between capital and labor, and to ensure economic growth. Measures such as employment protection, unemployment insurance, and wage bargaining have helped pave the way for an era of social stability in Europe and the United States. Using France and Germany as cases, Watson plans to test this idea by analyzing data from the stock market. Specifically, she is looking at what happens to a company's stock price when social protection measures are passed. Her idea is that the type of skills a company requires from its labor force will determine how its share price responds to protectionist legislation because such laws affect the incentives for workers to invest in different types of skills.