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Labor Market 'Rigidity' and the Success of Economic Reforms Across More Than 100 Countries

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Author Info

  • Alvaro Forteza
  • Martin Rama

Abstract

This paper shows that labor market policies and institutions have an impact on the effectiveness of economic reform programs. Countries with relatively 'rigid' labor markets experienced deeper recessions before adjustment and slower recoveries afterwards. Minimum wages and mandatory benefits are not detrimental to growth, but the relative size of organized labor, in government and overall, appear to be crucial. Labor market rigidity thus seems to be relevant for political reasons, more than for economic reasons. These findings suggest that insufficient attention has been paid to vocal groups who stand to lose from economic reforms.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Journal of Economic Policy Reform.

Volume (Year): 9 (2006)
Issue (Month): 1 ()
Pages: 75-105

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Handle: RePEc:taf:jpolrf:v:9:y:2006:i:1:p:75-105

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Related research

Keywords: Labor market rigidity; economic reforms;

References

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