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Labor Market Flexibility and Unemployment: New Empirical Evidence of Static and Dynamic Effects

Author

Listed:
  • Lorenzo E Bernal-Verdugo

    (University of Chicago, 1126 E. 59th Street, Chicago, IL 60637, USA.)

  • Davide Furceri

    (International Monetary Fund and University of Palermo, IMF, 700 19th Street, NW, Washington DC 20431, USA. E-mails: dfurceri@IMF.org, furceri@economia.unipa.it)

  • Dominique Guillaume

    (International Monetary Fund, 700 19th Street NW, 20431 Washington DC, USA.)

Abstract

The aim of this paper is to analyze the relationship between labor market flexibility and unemployment outcomes. Using a panel of 97 countries from 1985 to 2008, the results of the paper suggest that improvements in labor market flexibility have a statistically and significant negative impact on unemployment outcomes (over unemployment, youth unemployment, and long-term unemployment). Among the different labor market flexibility indicators analyzed, hiring and firing regulations and hiring costs are found to have the strongest effect.

Suggested Citation

  • Lorenzo E Bernal-Verdugo & Davide Furceri & Dominique Guillaume, 2012. "Labor Market Flexibility and Unemployment: New Empirical Evidence of Static and Dynamic Effects," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 54(2), pages 251-273, June.
    • Handle: RePEc:pal:compes:v:54:y:2012:i:2:p:251-273
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    References listed on IDEAS

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