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Drivers and effects of labour market reforms: Evidence from a novel policy compendium

Author

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  • Dragos Adascalitei

    (Central European University)

  • Clemente Pignatti Morano

    (International Labour Organization)

Abstract

The paper analyses the determinants and short-term effects of labour market reforms, using information from a novel policy compendium that covers 110 developed and developing economies between 2008 and 2014. We find that the approval of reforms is positively associated with the unemployment rate, the simultaneous implementation of fiscal consolidation measures and the presence of a fixed exchange rate regime. Differences in the results are explored by looking at the direction of reforms (i.e. increasing or decreasing legislation), temporal horizon (i.e. temporary or permanent measures) and coverage (i.e. complete or two-tier reforms); while also analysing separately reforms’ determinants across domains of labour legislation (e.g. permanent contracts, collective dismissals). Finally, we find that deregulatory labour market reforms tend to increase the unemployment rate in the short run when they are approved during contractionary periods—while they have a non-significant effect when approved during periods of economic stability or expansion. JEL Classification: J20, J52, J38, J48, J58, K31

Suggested Citation

  • Dragos Adascalitei & Clemente Pignatti Morano, 2016. "Drivers and effects of labour market reforms: Evidence from a novel policy compendium," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-32, December.
    • Handle: RePEc:spr:izalpo:v:5:y:2016:i:1:d:10.1186_s40173-016-0071-z
    DOI: 10.1186/s40173-016-0071-z
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    2. Emiliano Brancaccio & Fabiana De Cristofaro & Raffaele Giammetti, 2020. "No Consensus In The Imf-Oecd 'Consensus': A Meta-Analysis On The Employment Impact Of Labour Deregulations," Working Papers 445, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    3. Miguel Á., Malo, 2017. "Labour market institutions in small Pacific island countries: Main guidelines for labour market reforms," MPRA Paper 79988, University Library of Munich, Germany.
    4. Dragoș Adăscăliței & Jason Heyes & Pedro Mendonça, 2022. "The intensification of work in Europe: A multilevel analysis," British Journal of Industrial Relations, London School of Economics, vol. 60(2), pages 324-347, June.
    5. Chletsos, Michael & Sintos, Andreas, 2023. "The effects of IMF conditional programs on the unemployment rate," European Journal of Political Economy, Elsevier, vol. 76(C).
    6. Aumond, Romain & Di Tommaso, Valerio & Rünstler, Gerhard, 2022. "A narrative database of labour market reforms in euro area economies," Working Paper Series 2657, European Central Bank.
    7. Grodzicki, Maciej J. & Możdżeń, Michał, 2021. "Central and Eastern European economies in a Goldilocks age: A model of labor market institutional choice," Economic Modelling, Elsevier, vol. 104(C).
    8. Mohammad Ferdosi, 2021. "Canada’s unemployment insurance in crisis," International Journal of Social Welfare, John Wiley & Sons, vol. 30(2), pages 182-192, April.

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    More about this item

    Keywords

    Labour market reforms; Employment protection legislation; Unemployment; Developed economies; Developing economies;
    All these keywords.

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
    • J58 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Public Policy
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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