IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v43y2011i4p449-464.html
   My bibliography  Save this article

The effect of employment protection and product market regulation on labour market performance: substitution or complementarity?

Author

Listed:
  • Bruno Amable
  • Lilas Demmou
  • Donatella Gatti

Abstract

This article provides new evidence on the linkages between various forms of market regulation and joblessness and its components, unemployment and inactivity. One crucial contribution of this article is the analysis of the interdependence across Product Market Regulation (PMR) and labour markets regulation (Employment Protection Legislation (EPL)). With the help of a dynamic fixed effect model with an interaction term, we estimate the marginal impact of EPL and PMR at different levels of the other interacted variable. To cope with problems related to the inclusion of time-invariant institutional variables in fixed effect models, we present results of regressions based on a new procedure, specifically designed to treat slowly changing variables. We build time-series data to account for the annual evolution of EPL, and use new data for unemployment insurance net replacement rates. Among other results, we find evidence of a positive (negative) effect of EPL (PMR) on employment performance as well as of substitution, rather than complementarity, between the two forms of regulation.

Suggested Citation

  • Bruno Amable & Lilas Demmou & Donatella Gatti, 2011. "The effect of employment protection and product market regulation on labour market performance: substitution or complementarity?," Applied Economics, Taylor & Francis Journals, vol. 43(4), pages 449-464.
  • Handle: RePEc:taf:applec:v:43:y:2011:i:4:p:449-464
    DOI: 10.1080/00036840903317367
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840903317367
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kugler, Adriana & Pica, Giovanni, 2003. "Effects of Employment Protection and Product Market Regulations on the Italian Labor Market," IZA Discussion Papers 948, Institute for the Study of Labor (IZA).
    2. David T. Coe & Dennis J. Snower, 1997. "Policy Complementarities: The Case for Fundamental Labor Market Reform," IMF Staff Papers, Palgrave Macmillan, vol. 44(1), pages 1-35, March.
    3. Díaz-Vázquez, María del Pilar & Snower, Dennis J., 1996. "Employment, Macroeconomic Fluctuations and Job Security," CEPR Discussion Papers 1430, C.E.P.R. Discussion Papers.
    4. Koeniger, Winfried & Vindigni, Andrea, 2003. "Employment Protection and Product Market Regulation," IZA Discussion Papers 880, Institute for the Study of Labor (IZA).
    5. Olivier Blanchard, 2006. "European unemployment: the evolution of facts and ideas," Economic Policy, CEPR;CES;MSH, vol. 21(45), pages 5-59, January.
    6. Richard Freeman, 2005. "Labour market institutions without blinders: The debate over flexibility and labour market performance," International Economic Journal, Taylor & Francis Journals, vol. 19(2), pages 129-145.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Thibault Darcillon, 2012. "Do Interactions between Finance and Labor Market Institutions Affect Wage Distribution?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00768908, HAL.
    2. Gunther Tichy, 2014. "Flexicurity – A Concept Doomed to Failure," WIFO Monatsberichte (monthly reports), WIFO, vol. 87(8), pages 537-553, August.
    3. Rault, Christophe & Vaubourg, Anne-Gaël, 2011. "Labour Market Institutions and Unemployment: Does Finance Matter?," IZA Discussion Papers 5606, Institute for the Study of Labor (IZA).
    4. Giovanni Dosi & Marcelo C. Pereira & Andrea Roventini & Maria Enrica Virgillito, 2016. "The Effects of Labour Market Reforms upon Unemployment and Income Inequalities: an Agent Based Model," Sciences Po publications 2016-24, Sciences Po.
    5. Donatella Gatti & Anne-Gael Vaubourg, 2010. "Credit and Unemployment: Do Institutions Matter?," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(1), pages 37-43, April.
    6. Bruno Amable, 2014. "Who wants the Contrat de Travail Unique? Social Support for Labor Market Flexibilization in France," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 53(4), pages 636-662, October.
    7. Donatella Gatti & Christophe Rault & Anne-Gael Vaubourg, 2012. "Unemployment and finance: how do financial and labour market factors interact?," Oxford Economic Papers, Oxford University Press, vol. 64(3), pages 464-489, July.
    8. Sachs Andreas & Smolny Werner, 2015. "Youth Unemployment in the OECD: The Role of Institutions," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 235(4-5), pages 403-417, August.
    9. W.J. Liebregts & F.C. Stam, 2016. "Employment protection and entrepreneurship : Unpacking the effects of employment protection legislation on the allocation of entrepreneurial activity in society," Working Papers 16-08, Utrecht School of Economics.
    10. repec:bla:manchs:v:85:y:2017:i:4:p:466-490 is not listed on IDEAS
    11. Thibault Darcillon, 2016. "Do Interactions between Finance and Labour Market Institutions Affect the Income Distribution?," LABOUR, CEIS, vol. 30(3), pages 235-257, September.
    12. Andreas Sachs & Frauke Schleer, 2013. "Labour market performance in OECD countries: A comprehensive empirical modelling approach of institutional interdependencies," WWWforEurope Working Papers series 7, WWWforEurope.
    13. repec:sgh:gosnar:y:2017:i:3:p:29-53 is not listed on IDEAS

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:43:y:2011:i:4:p:449-464. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.