IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this book chapter

Labor Regulations, Unions, and Social Protection in Developing Countries

Listed author(s):
  • Freeman, Richard B.

This chapter reviews what economists have learned about the impact of labor market institutions, defined broadly as government regulations and union activity on labor outcomes in developing countries. It finds that:(1)Labor institutions vary greatly among developing countries but less than they vary among advanced countries. Unions and collective bargaining are less important in developing than in advanced countries while government regulations are nominally as important.(2)Many developing countries' compliance with minimum wage regulations produces spikes in wage distributions around the minimum in covered sectors. Most studies find modest adverse effects of the minimum on employment so that the minimum raises the total income of low-paid labor.(3)In many countries minimum wages spillover to the unregulated sector, producing spikes in the wage distributions there as well.(4)Employment protection regulations and related laws shift output and employment to informal sectors and reduce gross labor mobility.(5)Mandated benefits increase labor costs and reduce employment modestly while the costs of others is shifted largely to labor, with some variation among countries.(6)Contrary to the Harris-Todaro two-sector model in which rural-urban migration adjusts to produce a positive relation between unemployment and wages across regions and sectors, wages and unemployment are inversely related by the wage curve. (7)Unions affect nonwage outcomes as well as wage outcomes.(8)Cross-country regressions yield inconclusive results on the impact of labor regulations on growth while studies of country adjustments to economic shocks, such as balance of payments problems, find no difference in the responses of countries by the strength of labor institutions.(9)Labor institution can be critical when countries experience great change, as in China's growth spurt and Argentina's preservation of social stability and democracy after its 2001 2002 economic collapse. Cooperative labor relations tend to produce better economic outcomes.(10)The informal sector increased its share of the work force in the developing world in the past two decades. The persistence of large informal sectors throughout the developing world, including countries with high rates of growth, puts a premium on increasing our knowledge of how informal sector labor markets work and finding institutions and policies to deliver social benefits to workers in that sector.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/pii/B9780444529442000082
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

as
in new window

This chapter was published in:
  • Dani Rodrik & Mark Rosenzweig (ed.), 2010. "Handbook of Development Economics," Handbook of Development Economics, Elsevier, edition 1, volume 5, number 6, January.
  • This item is provided by Elsevier in its series Handbook of Development Economics with number v:5:y:2010:i:c:p:4657-4702.
    Handle: RePEc:eee:devchp:v:5:y:2010:i:c:p:4657-4702
    DOI: 10.1016/B978-0-444-52944-2.00008-2
    Contact details of provider: Web page: http://www.elsevier.com/wps/find/bookseriesdescription.cws_home/BS_HE/description

    References listed on IDEAS
    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.:

    as
    in new window

    1. Claudio Montenegro & Carmen Pagés, 2005. "Who Benefits from Labor Market Regulations? Chile 1960-1998," Central Banking, Analysis, and Economic Policies Book Series, in: Jorge Restrepo & Andrea Tokman R. & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Edi (ed.), Labor Markets and Institutions, edition 1, volume 8, chapter 4, pages 077-114 Central Bank of Chile.
    2. P. G. Moll, 1993. "Black South African Unions: Relative Wage Effects in International Perspective," ILR Review, Cornell University, ILR School, vol. 46(2), pages 245-261, January.
    3. Lora Sabin, 1999. "The development of urban labour markets: China's urban wage curve, 1980-92," Journal of Development Studies, Taylor & Francis Journals, vol. 35(3), pages 134-152.
    4. Adriana Cassoni & Steven G. Allen & Gaston J. Labadie, 2004. "Unions and Employment in Uruguay," NBER Chapters, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 435-496 National Bureau of Economic Research, Inc.
    5. William F. Maloney & Jairo Nunez Mendez, 2003. "Measuring the Impact of Minimum Wages: Evidence from Latin America," NBER Working Papers 9800, National Bureau of Economic Research, Inc.
    6. Botero, J. C. & Djankov, S. & Porta, R. L. & Lopez-de-Silanes, F. & Shleifer, Andrei, 2004. "The Regulation of Labor," Scholarly Articles 27867241, Harvard University Department of Economics.
    7. Janine Berg & Dante Contreras, 2002. "Political-Economic Regime and the Wage Curve: Evidence from Chile, 1957-96," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2002-10, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    8. Gindling, T.H. & Terrell, Katherine, 2007. "The effects of multiple minimum wages throughout the labor market: The case of Costa Rica," Labour Economics, Elsevier, vol. 14(3), pages 485-511, June.
    9. Bell, Linda A, 1997. "The Impact of Minimum Wages in Mexico and Colombia," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 102-135, July.
    10. David Fairris, 2006. "Union Voice Effects in Mexico," British Journal of Industrial Relations, London School of Economics, vol. 44(4), pages 781-800, December.
    11. Richard B. Freeman & James L. Medoff, 1981. "The Impact of Collective Bargaining: Illusion or Reality?," NBER Working Papers 0735, National Bureau of Economic Research, Inc.
    12. Hoddinott, John, 1996. "Wages and Unemployment in an Urban African Labour Market," Economic Journal, Royal Economic Society, vol. 106(439), pages 1610-1626, November.
    13. Forteza, Alvaro & Rama, Martin, 2001. "Labor market"rigidity"and the success of economic reforms across more than one hundred countries," Policy Research Working Paper Series 2521, The World Bank.
    14. Jonathan Gruber & Alan B. Krueger, 1990. "The Incidence of Mandated Employer-Provided Insurance: Lessons from Workers' Compensation Insurance," NBER Working Papers 3557, National Bureau of Economic Research, Inc.
    15. Rana Hasan & Devashish Mitra & K.V. Ramaswamy, 2003. "Trade Reforms, Labor Regulations and Labor-Demand Elasticities: Empirical Evidence from India," NBER Working Papers 9879, National Bureau of Economic Research, Inc.
    16. Harrison, Ann & Scorse, Jason, 2003. "Globalization's impact on compliance with labor standards," MPRA Paper 36450, University Library of Munich, Germany.
    17. Ipek Ilkkaracan & Raziye Selim, 2003. "The role of unemployment in wage determination: further evidence on the wage curve from Turkey," Applied Economics, Taylor & Francis Journals, vol. 35(14), pages 1589-1598.
    18. Mikael Lindahl & Alan B. Krueger, 2001. "Education for Growth: Why and for Whom?," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1101-1136, December.
    19. Erwin Ooghe & Erik Schokkaert & Jef Flechet, 2003. "The Incidence of Social Security Contributions: An Empirical Analysis," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 30(2), pages 81-106, June.
    20. Rama, Martin, 1996. "The consequences of doubling the minimum wage : the case of Indonesia," Policy Research Working Paper Series 1643, The World Bank.
    21. Squire, Lyn & Suthiwart-Narueput, Sethaput, 1995. "The impact of labor market regulations," Policy Research Working Paper Series 1418, The World Bank.
    22. Besley, Timothy J. & Burgess, Robin, 2002. "Can Labour Regulation Hinder Economic Performance? Evidence from India," CEPR Discussion Papers 3260, C.E.P.R. Discussion Papers.
    23. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
    24. Adriana D. Kugler, 2004. "The Effect of Job Security Regulations on Labor Market Flexibility. Evidence from the Colombian Labor Market Reform," NBER Chapters, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 183-228 National Bureau of Economic Research, Inc.
    25. Kingdon, Geeta Gandhi & Knight, John, 2004. "Unemployment in South Africa: The Nature of the Beast," World Development, Elsevier, vol. 32(3), pages 391-408, March.
    26. Douglas Marcouiller, S.J. & Veronica Ruiz de Castilla & Christopher Woodruff, 1995. "Formal Measures of the Informal Sector Wage Gap in Mexico, El Salvador, and Peru," Boston College Working Papers in Economics 294., Boston College Department of Economics.
    27. Maloney, William F, 1999. "Does Informality Imply Segmentation in Urban Labor Markets? Evidence from Sectoral Transitions in Mexico," World Bank Economic Review, World Bank Group, vol. 13(2), pages 275-302, May.
    28. Fields, Gary S & Yoo, Gyeongjoon, 2000. "Falling Labor Income Inequality in Korea's Economic Growth: Patterns and Underlying Causes," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 46(2), pages 139-159, June.
    29. Standing, Guy, 1992. "Do Unions Impede or Accelerate Structural Adjustment? Industrial versus Company Unions in an Industrialising Labour Market," Cambridge Journal of Economics, Oxford University Press, vol. 16(3), pages 327-354, September.
    30. Geeta Gandhi Kingdon & John Knight, 2006. "How Flexible are Wages in Response to Local Unemployment in South Africa?," ILR Review, Cornell University, ILR School, vol. 59(3), pages 471-495, April.
    31. Aditya Bhattacharjea, 2006. "Labour Market Regulation and Industrial Performance in India--A Critical Review of the Empirical Evidence," Working papers 141, Centre for Development Economics, Delhi School of Economics.
    32. Jonathan Gruber, 1995. "The Incidence of Payroll Taxation: Evidence from Chile," NBER Working Papers 5053, National Bureau of Economic Research, Inc.
    33. Strobl, Eric & Walsh, Frank, 2003. "Minimum Wages and Compliance: The Case of Trinidad and Tobago," Economic Development and Cultural Change, University of Chicago Press, vol. 51(2), pages 427-450, January.
    34. Adriana Cassoni & Gaston J. Labadie & Gabriela Fachola, 2002. "The Economic Effects of Unions in Latin America: Their Impact on Wages and the Economic Performance of Firms in Uruguay," Research Department Publications 3159, Inter-American Development Bank, Research Department.
    35. Alida Castillo-Freeman & Richard B. Freeman, 1992. "When the Minimum Wage Really Bites: The Effect of the U.S.-Level Minimum on Puerto Rico," NBER Chapters, in: Immigration and the Workforce: Economic Consequences for the United States and Source Areas, pages 177-212 National Bureau of Economic Research, Inc.
    36. Geeta Kingdon & Justin Sandefur & Francis Teal, 2006. "Labour Market Flexibility, Wages and Incomes in Sub‐Saharan Africa in the 1990s," African Development Review, African Development Bank, vol. 18(3), pages 392-427.
    37. Donald W.K. Andrews, 1990. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Cowles Foundation Discussion Papers 943, Cowles Foundation for Research in Economics, Yale University.
    38. César Calderón & Alberto Chong, 2005. "Are Labor Market Regulations an Obstacle for Long-term Growth?," Central Banking, Analysis, and Economic Policies Book Series, in: Jorge Restrepo & Andrea Tokman R. & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Edi (ed.), Labor Markets and Institutions, edition 1, volume 8, chapter 6, pages 167-219 Central Bank of Chile.
    39. Freeman, Richard B, 1993. "Labor Markets and Institutions in Economic Development," American Economic Review, American Economic Association, vol. 83(2), pages 403-408, May.
    40. Butcher, Kristin F. & Rouse, Cecilia Elena, 2001. "Wage effects of unions and industrial councils in South Africa," Policy Research Working Paper Series 2520, The World Bank.
    41. Richard B. Freeman & Edward P. Lazear, 1994. "An Economic Analysis of Works Councils," NBER Working Papers 4918, National Bureau of Economic Research, Inc.
    42. Schultz, T.P. & Mwabu, G., 1997. "Labor Unions and the Distribution of Wages and Employment in South Africa," Papers 776, Yale - Economic Growth Center.
    43. Gurleen K. Popli, 2007. "Rising Wage Inequality in Mexico, 1984-2000: A Distributional Analysis," Journal of Income Distribution, Journal of Income Distribution, vol. 16(2), pages 49-67, June.
    44. Gindling, T. H. & Terrell, Katherine, 1995. "The nature of minimum wages and their effectiveness as a wage floor in Costa Rica, 1976-1991," World Development, Elsevier, vol. 23(8), pages 1439-1458, August.
    45. Sara Lemos, 2004. "Minimum Wage Policy and Employment Effects: Evidence from Brazil," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, vol. 0(Fall 2004), pages 219-266, August.
    46. Niels-Hugo Blunch & Dorte Verner, 2004. "Asymmetries in the Union Wage Premium in Ghana," World Bank Economic Review, World Bank Group, vol. 18(2), pages 237-252.
    47. van der Meulen Rodgers, Yana & Nataraj, Sita, 1999. "Labor Market Flexibility in East Asia: Lessons from Taiwan," Economic Development and Cultural Change, University of Chicago Press, vol. 48(1), pages 51-69, October.
    48. Zhongmin Wu, 2004. "Wage curve for urban China: a panel data approach," Applied Economics Letters, Taylor & Francis Journals, vol. 11(7), pages 425-428.
    49. David Fairris, 2003. "Unions and Wage Inequality in Mexico," ILR Review, Cornell University, ILR School, vol. 56(3), pages 481-497, April.
    50. Zadia M. Feliciano, 1998. "Does the Minimum Wage Affect Employment in Mexico?," Eastern Economic Journal, Eastern Economic Association, vol. 24(2), pages 165-180, Spring.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:devchp:v:5:y:2010:i:c:p:4657-4702. 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: (Shamier, Wendy)

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.