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Rigidities in Employment Protection and Exporting


  • Seker, Murat


There have been significant improvements in traditional trade policies in the past few decades. However, these improvements can only be fully effective when they are complemented with a favorable investment climate. This study focuses on a particular aspect of investment climate, namely labor regulations, and shows how these regulations can be discouraging from exporting. Using firm level data from 26 countries in Eastern Europe and Central Asia region, the paper empirically shows that firms that cannot create new jobs due to stringent labor regulations are less likely to export. Firms that plan to export expand their sizes before they start to export. However, the rigidities in labor markets make this adjustment process costly. Higher costs of employment decrease operating profits and lead to a higher productivity threshold level required for entering export markets. As a result, a smaller fraction of firms can afford to export.

Suggested Citation

  • Seker, Murat, 2012. "Rigidities in Employment Protection and Exporting," World Development, Elsevier, vol. 40(2), pages 238-250.
  • Handle: RePEc:eee:wdevel:v:40:y:2012:i:2:p:238-250
    DOI: 10.1016/j.worlddev.2011.05.008

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    References listed on IDEAS

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    Cited by:

    1. repec:spr:eurasi:v:7:y:2017:i:3:d:10.1007_s40821-016-0069-x is not listed on IDEAS
    2. Zara Liaqat & Jeffrey Nugent, 2015. "Under-provision of private training by MENA firms: what to Do about It?," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-29, December.
    3. Ahmed Fayez Abdelgouad, 2016. "Exporting and Workforce Skills-Intensity in the Egyptian Manufacturing Firms: Empirical Evidence Using World Bank Firm-Level Data for Egypt," Working Paper Series in Economics 358, University of Lüneburg, Institute of Economics.

    More about this item


    exporting; firm heterogeneity; labor regulations; developing countries; Eastern Europe and Central Asia region;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand


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