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Regulation and Labour Market Performance

  • Tito Boeri
  • Giuseppe Nicoletti
  • Stefano Scarpetta

The increasing literature on the interactions between liberalisation-integration of product markets and labour market reforms is often highly speculative and draws on a rather weak empirical basis. Cross-country indicators of regulatory frameworks are often lacking, making it difficult to identify the linkages with observed outcomes in the labour and product markets. Moreover, empirical studies have often focused exclusively on the impact of certain labour market regulations,largely ignoring the role of product market regulations and the interactions between regulatory interventions in the two markets. As a result, while there are convincing theoretical arguments pointing to a potentially positive effect of product market liberalisation on labour market performance, empirical investigations of this issue are lacking. This paper aims at providing some preliminary evidence on these issues. In particular, the cross-country patterns and changing profile of product and labour market regulations are identified. Evidence on the relationships between product and labour market regulations is discussed in the context of other policies and institutional factors affecting the labour market; and the clustering and convergence of institutions across countries are characterised. More importantly, the paper reports evidence of a potentially significant impact of product and labour market regulations on employment and its composition. The evidence presented draws heavily on a novel set of cross-country indicators of regulation in the product and labour markets assembled at the OECD. It should be stressed at the outset that these indicators are preliminary estimates and should be taken only as rough approximations of the regulatory stance across OECD countries.

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Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 158.

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Handle: RePEc:igi:igierp:158
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  1. Bertola, Giuseppe, 1992. "Labor Turnover Costs and Average Labor Demand," Journal of Labor Economics, University of Chicago Press, vol. 10(4), pages 389-411, October.
  2. Calmfors, Lars, 1998. "Macroeconomic Policy, Wage Setting, and Employment--What Difference Does the EMU Make?," Oxford Review of Economic Policy, Oxford University Press, vol. 14(3), pages 125-51, Autumn.
  3. Richard Jackman & Richard Layard & Stephen Nickell, 1996. "Combatting Unemployment: Is Flexibility Enough?," CEP Discussion Papers dp0293, Centre for Economic Performance, LSE.
  4. bertola, G. & Rogerson, R., 1996. "Institutions and Labor Reallocation," Papers 272, Banca Italia - Servizio di Studi.
  5. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
  6. Alan Krueger & Jorn-Steffen Pischke, 1997. "Observations and Conjectures on the U.S. Employment Miracle," Working Papers 769, Princeton University, Department of Economics, Industrial Relations Section..
  7. Boeri, Tito, 1998. "Enforcement of Employment Security Regulations, On-The-Job Search and Unemployment Duration," CEPR Discussion Papers 1850, C.E.P.R. Discussion Papers.
  8. Calmfors, Lars, 1998. "Macroeconomic Policy, Wage Setting and Employment - What Difference Does the EMU Make?," Seminar Papers 657, Stockholm University, Institute for International Economic Studies.
  9. Olivier Blanchard & Pedro Portugal, 1998. "What Hides Behind An Unemployment Rate: Comparing Portuguese and Us Unemployment," Working Papers w199803, Banco de Portugal, Economics and Research Department.
  10. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
  11. Giuseppe Nicoletti & Stefano Scarpetta & Olivier Boylaud, 2000. "Summary Indicators of Product Market Regulation with an Extension to Employment Protection Legislation," OECD Economics Department Working Papers 226, OECD Publishing.
  12. Calmfors, L., 1998. "Macroeconomic Policy, Wage Setting and Employment -What Differences Does the EMU Make?," Papers 657, Stockholm - International Economic Studies.
  13. Noll, Roger G., 1989. "Economic perspectives on the politics of regulation," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 22, pages 1253-1287 Elsevier.
  14. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
  15. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
  16. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
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