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

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  • Mr. Lorenzo E. Bernal-Verdugo
  • Davide Furceri
  • Mr. Dominique M. Guillaume

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

  • Mr. Lorenzo E. Bernal-Verdugo & Davide Furceri & Mr. Dominique M. Guillaume, 2012. "Labor Market Flexibility and Unemployment: New Empirical Evidence of Static and Dynamic Effects," IMF Working Papers 2012/064, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2012/064
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    References listed on IDEAS

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