How labor market policies can combine workers'protection with job creation : a partial review of some key issues and policy options

To what extent have macro and structural reforms in many developing countries affected the labor market? Are current policy settings in the labor market adequate to cope with the current challenges of a more dynamic but also more risky economic environment? Are there examples of successful labor reforms that have combined greater adaptability with greater workers'protection? What can labor policy do when resources are scarce and informality looms large? These are some of the questions the authors address in this paper by presenting an in-depth review of formal policy and institutional settings in the labor market of many developing and emerging economies. They also report some evidence of the effects of policy reforms on job creation and on the ability of workers to cope with shocks.The structure of the paper is as follows. In Section 1, the authors review the evidence on the flexibility of the labor market in developing and emerging economies, and discuss how macro and structural changes have affected workers. In Section 2 they maps government laws and regulations in the labor market and assess their potential effects on workers as well as on firms'decision to invest and create jobs. Finally, in Section 3 they discuss the role of public policies in promoting the mobility of workers towards more productive jobs while also helping them to deal with labor adjustment and, more generally, unemployment risk.