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Pending issues in protection, productivity growth, and poverty reduction

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Author Info
Arias, Omar
Blom, Andreas
Bosch, Mariano
Cunningham, Wendy
Fiszbein, Ariel
Lopez Acevedo, Gladys
Maloney, William
Saavedra, Jaime
Sanchez-Paramo, Carolina
Santamaria, Mauricio
Siga, Lucas

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Abstract

This paper selectively synthesizes much of the research on Latin American and Caribbean labor markets in recent years. Several themes emerge that are particularly relevant to ongoing policy dialogues. First, labor legislation matters, but markets may be less segmented than previously thought. The impetus to voluntary informality, which appears to be a substantial fraction of the sector, implies that the design of social safety nets and labor legislation needs to take a more integrated view of the labor market, taking into account the cost-benefit analysis workers and firms make about whether to interact with formal institutions. Second, the impact of labor market institutions on productivity growth has probably been underemphasized. Draconian firing restrictions increase litigation and uncertainty surrounding worker separations, reduce turnover and job creation, and poorly protect workers. But theory and anecdotal evidence also suggest that they, and other related state or union induced rigidities, may have an even greater disincentive effect on technological adoption, which accounts for half of economic growth. Finally, institutions can affect poverty and equity, although the effects seem generally small and channels are not always clear. Overall, the present constellation of labor regulations serves workers and firms poorly and both could benefit from substantial reform.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3799.

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Date of creation: 01 Dec 2005
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Handle: RePEc:wbk:wbrwps:3799

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Keywords: Labor Markets; Labor Standards; Economic Theory&Research; Work&Working Conditions; Labor Management and Relations;

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Cunningham, Wendy & Jacobsen, Joyce P., 2008. "Earnings inequality within and across gender, racial, and ethnic groups in four Latin American Countries," Policy Research Working Paper Series 4591, The World Bank. [Downloadable!]
  2. Gutierrez, Catalina & Orecchia, Carlo & Paci, Pierella & Serneels, Pieter, 2007. "Does employment generation really matter for poverty reduction ?," Policy Research Working Paper Series 4432, The World Bank. [Downloadable!]
  3. Lykke E. Andersen & Beatriz Muriel, 2007. "Informality and Productivity in Bolivia: A Gender Differentiated Empirical Analysis," Development Research Working Paper Series 07/2007, Institute for Advanced Development Studies. [Downloadable!]
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