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Research

This page contains references to relevant research papers on employment regulations.

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  • The Regulation of Labor

    Author(s) : Juan C. Botero, Simeon Djankov, Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer Journal : The Quarterly Journal of Economics, Oxford University Press, vol. 119(4): 1339-1382. 2004 Abstract : This paper investigates the regulation of labor markets through employment, collective relations, and social security laws in 85 countries. It finds that the political power of the left is associated with more stringent labor regulations and more generous social security systems, and that socialist, French, and Scandinavian legal origin countries have sharply higher levels of labor regulation than do common law countries. However, the effects of legal origins are larger, and explain more of the variation in regulations, than those of politics. Heavier regulation of labor is associated with lower labor force participation and higher unemployment, especially of the young. These results are most naturally consistent with legal theories, according to which countries have pervasive regulatory styles inherited from the transplantation of legal systems.

  • Labor Laws in Eastern European and Central Asian Countries: Minimum Norms and Practices

    Author(s) : Kuddo, Arvo Journal : SP Discussion Paper. No. 0920. Washington. D.C. World Bank. 2009 Abstract : This study focuses on internationally accepted labor standards and norms governing the individual employment contract, including International Labor Organization (ILO) conventions and recommendations, European Union (EU) labor standards, and the European community social charter. The study also analyzes relevant provisions in the main labor law of each Eastern European and Central Asian (ECA) country associated with commencing or terminating employment and during the period of employment. References are made to relevant practices from EU15 countries. Overall, despite similar origin of country labor laws, the current set of labor regulations in the region provides a wide array of legal solutions. The minimum content of the employment contract in most ECA countries coincides, and goes beyond, the requirements of the labor standards even in the countries that are non-signatories of relevant treaties. Some of these entitlements, however, have the potential to adversely affect labor market participation.

  • Labor Market Regulations in Low-, Middle-and High-Income Countries: A New Panel Database

    Author(s) : Aleksynska, Mariya; Schindle, Martin Journal : IMF Working Paper. 2011 Abstract : This paper documents a new database of labor market regulations during 1980-2005 in 91 countries, including low-, middle- and high-income countries, and contains information on unemployment insurance systems, minimum wage regulations, and employment protection legislation. In this paper, we provide details regarding the data, methodology and sources. Descriptive statistics indicate that there exists substantial heterogeneity in labor market institutions across regions and income groupings, and that much of the sample variation is driven by institutional changes over time in low- and middle-income countries. All indicators are at an annual frequency, allowing for the dating of major changes in regulation, and are based on data from a variety of sources, including the ILO, OECD and national agencies.

  • Structural Change, Fundamentals and Growth: A Framework and Case Studies

    Author(s) : McMillan, Margaret, Dani Rodrik, and Claudia Sepulveda Journal : No. w23378. National Bureau of Economic Research, 2017 Abstract : Developing countries made considerable gains during the first decade of the 21st century. Their economies grew at unprecedented rates, resulting in large reductions in extreme poverty and a significant expansion of the middle class. But more recently that progress has slowed with an economic environment of lackluster global trade, not enough jobs coupled with skills mismatches, continued globalization and technological change, greater income inequality, unprecedented population aging in richer countries, and youth bulges in the poorer ones. This essay examines how seven key countries fared from 1990-2010 in their development quest. The sample includes seven developing countries—Botswana, Ghana, Nigeria, Zambia, India, Vietnam and Brazil —all of which experienced rapid growth in recent years, but for different reasons. The patterns of growth are analyzed in each of these countries using a unifying framework which draws a distinction between the “structural transformation” and “fundamentals” challenge in growth. Out of these seven countries, the traditional path to rapid growth of export oriented industrialization only played a significant role in Vietnam.

  • Enforcement Matters: The Effective Regulation of Labor

    Author(s) : Kanbur, Ravi, and Lucas Ronconi Journal : CEPR Discussion Paper No. DP11098 Abstract : This paper provides, to our knowledge for the first time, cross-country measures of enforcement of labor law across almost every country in the world. The distinction between de jure and de facto regulation is well understood in theory, but almost never implemented in cross-country empirical work because of lack of data. As a result, influential papers like the one by Botero et. al. (2004) published in the Quarterly Journal of Economics, which have shaped the policy debate by finding strong negative consequences of labor regulation on labor market outcomes, are based entirely on measures of de jure stringency of regulations. We show that this neglect of regulation enforcement matters. There is, on average, a negative correlation between the stringency of labor regulation and the intensity of its enforcement. The strong results of Botero et. al. (2004) on the consequences of labor regulation, and the hypotheses of La Porta et. al (2008) on the legal origin theory of regulation stringency, no longer hold for effective labor regulation.

  • Determinants of Regulatory Reform

    Author(s) : Djankov, Simeon, Dorina Georgieva, and Rita Ramalho Journal : FMG Discussion Paper DP765 (2017) Abstract : Using panel data for 189 economies from 2004 to 2016, we show that regulatory reform is associated with periods of fiscal imbalances. This association is significant in advanced economies and in post-communist countries. The presence of IMF programs in developing countries, a consequence of fiscal pressures, encourages regulatory reform. However, the effect of fiscal imbalances on reform weakens when governments can rely on low borrowing costs. Fiscal imbalances spur political change too, though the latter also has a significant independent effect on the proclivity for regulatory reform.

  • On the Interaction between Trade Reforms and Labor Market Regulation: Evidence from the MENA Countries’ Labor Markets

    Author(s) : Selwaness, Irène, and Chahir Zaki. Journal : No. 27. GLO Discussion Paper, 2017 Abstract : Using a panel of MENA countries, this paper tries to examine the interaction between trade reforms and labor market regulations on the outcome of the labor market. The theoretical predictions of this literature show that the effects of trade liberalization in any given country are conditional on the nature of labor market regulations since trade liberalization is more likely to have a positive impact on employment and wages in countries with flexible labor markets and vice versa. Moreover, more regulated labor markets tend to have higher wages at the expense of sector wide employment. Our main findings show that labor market rigidity reduces the positive impact of trade reform on employment. While this result is stronger for females, it is not for males.

  • Labor policy and digital technology use: indicative evidence from cross-country correlations

    Author(s) : Packard, Truman G.; Montenegro, Claudio E. Journal : Policy Research Working Paper. WPS8221. (2017)  Abstract : This paper exploits variation in country-level indicators drawn from published data to analyze the relationship between labor regulation and the use of digital technology. The analysis shows a statistically and economically significant association between digital technology use by firms and a country's statutory minimum wage and employment protection regulations. The results are robust to the inclusion of controls for level of development, economic stability, available infrastructure, and trade openness. To ensure the broadest country coverage, the paper develops new indexes of employment protection, using the World Bank's Doing Business indicators, which allow several aspects of labor market regulation—such as restrictions on hours and hiring, dismissal procedures, and severance costs--to be analyzed separately.

  • Job Quality and Poverty in Latin America

    Author(s) : Peter Brummund, Christopher Mann, and Carlos Rodríguez-Castelán Journal : World Bank Group Abstract : Labor market dynamics have played a significant role in the remarkable social gains experienced across Latin America over the recent past. Assessing the quality of employment, beyond the perspective of income, to include other fundamental aspects of jobs --such as whether jobs are secure, provide benefits, or allow human capital accumulation -- can shed light on the sustainability of these achievements. This is particularly pertinent given the region's current economic slowdown. Using harmonized data for 17 countries in Latin America, this paper connects the role of job quality with the recent process of inclusive growth across the region, and particularly with how individuals worked their way out of poverty. The paper first proposes a multi-dimensional measure for job quality, and then uses this measure to compare job quality across countries and over time. The paper also studies some of the correlates of job quality and the relationship between job quality and poverty. The main finding is that job quality across the region began to increase since 2004, coupled with the favorable terms of trade brought to the region by the commodities super cycle of the 2000s. The best predictors of job quality are age, gender, education, formal employment, and union membership. Both health and retirement benefits are the dimensions of job quality that are best correlated with not living in poverty.

  • Labor protection and the privatization or partial privatization method

    Author(s) : Belkhira, Mohamed; Ben-Nasr, Hamdi Journal : International Review of Economics & Finance Abstract : In this paper, we examine whether the extent to which the labor force is legally protected impacts the choice of whether to privatize SOEs through share issues in the public stock exchange or through asset sales to a small group of investors. Based on a sample of 3983 privatizations, which occurred from 1989 through 2008 in 55 countries, and using various measures of labor protection, we find that greater labor protection enhances the likelihood of share issue privatizations (SIPs). This result is robust to controls for political, legal, and economic factors and suggests that legally protected labor acquires enough power to be able to influence a government's choice of the privatization method. We also provide evidence that the positive effect of labor protection on the likelihood of SIPs is stronger (weaker) in countries where investors enjoy better (worse) legal protection, financial systems are more (less) developed, and when foreign investors are involved in the privatization offer.

  • The impact of employment protection on temporary employment: Evidence from a regression discontinuity design

    Author(s) : Alexander Hijzen, Leopoldo Mondauto, Stefano Scarpetta Journal : Labor Economics Abstract : This paper analyses the impact of employment protection (EP) on the composition of the workforce and worker turnover using a unique firm-level dataset for Italy. The impact of employment protection is analyzed by means of a regression discontinuity design (RDD) that exploits the variation in EP provisions in Italy across firms below and above a size threshold. We present three main findings. First, EP increases worker turnover, defined as the sum of hires and separations, thereby reducing rather than increasing worker security on average. Second, this can be entirely explained by the fact that firms facing more stringent EP make a greater use of workers on temporary contracts. Our preferred estimates suggest that the discontinuity in EP increases the incidence of temporary work by 2–2.5 percentage points around the threshold. Moreover, the effect of employment protection persists well beyond the threshold and may account for about 12% of the overall incidence of temporary work. Third, EP tends to reduce labour productivity. This is partly due to the impact of EP on worker turnover and the incidence of temporary work.

  • Income Inequality and Labor Market Regulations: A Comparative Analysis

    Author(s) : Tjong, Erick; Schmillen, Achim Daniel Journal : Doing Business Research Notes Abstract : This note uses data from Doing Business to analyze the relationship between the business environment and income inequality, with a focus on the area of labor market regulation. Its aim is to investigate if regulations that are good for businesses could also be useful tools for reducing inequality. It provides some insights on the relations between inequality and different aspects of labor market regulation, such as employment protection laws, labor taxes and social contributions, and minimum wage policies. The data reveals that stricter employment protection and minimum wage laws are associated with higher levels of inequality, whereas a negative correlation was found for the case of labor taxes and social contributions. The findings suggest that a balanced, context-specific and well-designed approach to labor market regulations could contribute to achieving the goals of reducing inequality and fostering a competitive business climate.