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The Effect of Employment Protection and Product Market Regulation on Labour Market Performance: Substitution or Complementarity?

Author

Listed:
  • Bruno Amable

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Lilas Demmou

    (CEPREMAP - Centre pour la recherche économique et ses applications - ECO ENS-PSL - Département d'économie de l'ENS-PSL - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres)

  • Donatella Gatti

    (CEPN - Centre d'Economie de l'Université Paris Nord (ancienne affiliation) - UP13 - Université Paris 13 - CNRS - Centre National de la Recherche Scientifique, IZA - Institute for the Study of Labor, PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

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.
(This abstract was borrowed from another version of this item.)

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?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00564856, HAL.
    • Handle: RePEc:hal:cesptp:hal-00564856
    DOI: 10.1080/00036840903317367
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    1. 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.
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