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Labor Market Institutions and Restructuring: Evidence from Regulated and Unregulated Labor Markets in Brazil

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  • Jasper Hoek

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Abstract

This paper compares patterns of hiring and separations in regulated and unregulated labor markets over the last two decades in Brazil, with an eye toward gauging the effects of employment protection on employment adjustment over the business cycle. Since the difference between the sectors is stark and well-defined, the consequences of employment protection on flows through the labor market are relatively easy to discern. Employment protection causes adjustment to demand fluctuations to come at the expense of the unemployed. A reduction in employment in the regulated labor market is achieved by lowering the rate at which the unemployed get jobs. In the unregulated market, the same reduction is achieved by raising the separation rate. In principle, the restructuring mechanisms of both sectors could be compatible with similar contributions to unemployment. In practice, contributions from the regulated sector are more persistent and erratic. The contribution of the unregulated sector is stable and countercyclical.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 484.

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Length: 49 pages
Date of creation: 01 Jul 2002
Date of revision:
Handle: RePEc:wdi:papers:2002-484

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Keywords: Labor market institutions; incomplete contracts; informal sector; severance pay; business cycle fluctutations;

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References

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  8. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "Job reallocation, employment fluctuations and unemployment," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 18, pages 1171-1228 Elsevier.
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  14. James J. Heckman & Carmen Pages, 2000. "The Cost of Job Security Regulation: Evidence from Latin American Labor Markets," NBER Working Papers 7773, National Bureau of Economic Research, Inc.
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Cited by:
  1. Bosch, Mariano & Esteban-Pretel, Julen, 2012. "Job creation and job destruction in the presence of informal markets," Journal of Development Economics, Elsevier, vol. 98(2), pages 270-286.
  2. Maxim Bouev, 2005. "State Regulations, Job Search and Wage Bargaining: A Study in the Economics of the Informal Sector," William Davidson Institute Working Papers Series wp764, William Davidson Institute at the University of Michigan.
  3. Mariano Bosch & Julen Esteban-Pretel, 2009. "Cyclical Informality and Unemployment," CIRJE F-Series CIRJE-F-613, CIRJE, Faculty of Economics, University of Tokyo.
  4. Christopher A. Hartwell, 2010. "Employment Protection Legislation and Labor Markets in Transition: Assessing the Effects of the Labor Code in Armenia," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 7(2), pages 413-445, December.
  5. Maxim Bouev, 2004. "Diverging Paths: Transition in the Presence of the Informal Sector," William Davidson Institute Working Papers Series 2004-689, William Davidson Institute at the University of Michigan.

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