Emerging economies are characterized as having underdeveloped financial markets. Furthermore, many of these economies have employment protection laws that make it costly for firms to fire workers.  Understanding the interaction between these features is key for evaluating financial and labor policy reforms since they have a direct impact on the allocation of resources and aggregate productivity. Marcos quantifies the effect on aggregate productivity of an improvement in financial development in economies with firing costs. He develops a model of heterogeneous firms that features both firing costs and collateral constraints, and calibrates key productivity and production function parameters using rich plant level data from Chile.  He finds that aggregate productivity increases by 2.5% following a financial reform that makes Chile's financial development comparable to that of the United Kingdom. Ignoring firing costs underestimates the impact of the reform, predicting an increase in productivity of 0.3%. Acknowledging firing costs introduces two reasons why the financial reform has a stronger effect. On the one hand, firms with high past employment hoard labor and, as a result, demand more capital, which makes them more likely to be financially constrained. On the other hand, an increase in wages following the reform increases the effective firing cost and hence discourages firms with low past employment from hiring. As a result, these firms demand less capital than they would if there were no firing costs and are less likely to be financially constrained.