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The Dynamics of the Regulation of Labor in Developing and Developed Countries since 1960

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  • Campos, Nauro F

    () (Brunel University)

  • Nugent, Jeffrey B.

    () (University of Southern California)

Abstract

This paper examines both the determinants and the effects of changes in the rigidity of labor market legislation across countries over time. Recent research identifies the origin of the legal system as being a major determinant of the cross-country variation in the rigidity of employment protection legislation. However, the supporting evidence is largely confined to levels of regulation and is almost exclusively based on international cross-section data for the post-1995 period. This paper introduces a new index capturing the rigidity of employment protection legislation (LAMRIG) for an unbalanced panel of more than 140 countries over time starting in 1960. Although the importance of legal origins in explaining the level of rigidity of labor regulations across countries is replicated using LAMRIG, their explanatory power is much weakened for changes over time (1960-2004.) More important as determinants of such changes are the level of development and other reforms such as trade liberalization. With respect to the effects of changes in the rigidity of labor regulations on growth and inequality, which have been very controversial in the literature, results with LAMRIG support Freeman's conjecture that changes in rigidity do not systematically affect economic growth but do lower income inequality.

Suggested Citation

  • Campos, Nauro F & Nugent, Jeffrey B., 2012. "The Dynamics of the Regulation of Labor in Developing and Developed Countries since 1960," IZA Discussion Papers 6881, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6881
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    Cited by:

    1. Alberto Chong & Angelo Cozzubo, 2017. "Why Won’t Workers Do Their Jobs? Labor Market Rigidity and Job Performance in the Public Sector," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1703, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    2. Francois Langot & Shaimaa Yassin, 2016. "Informality, Public Employment and Employment Protection in Developing Countries," IRENE Working Papers 16-09, IRENE Institute of Economic Research.
    3. repec:ilo:ilowps:486240 is not listed on IDEAS
    4. Orsetta Causa & Mikkel Hermansen & Nicolas Ruiz, 2016. "The Distributional Impact of Structural Reforms," OECD Economics Department Working Papers 1342, OECD Publishing.
    5. Aleksynska, Mariya. & Schmidt, Alexandra., 2014. "A chronology of employment protection legislation in some selected European countries," ILO Working Papers 994862403402676, International Labour Organization.
    6. Belkhir, Mohamed & Ben-Nasr, Hamdi, 2016. "Labor protection and the privatization or partial privatization method," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 305-322.
    7. François Langot & Shaimaa Yassin, 2015. "Reforming Employment Protection in Egypt: An Evaluation Based on Transition Models with Measurement Errors," Working Papers 918, Economic Research Forum, revised Jun 2015.
    8. repec:eee:jcecon:v:46:y:2018:i:1:p:326-348 is not listed on IDEAS
    9. Zara Liaqat & Jeffrey Nugent, 2015. "Under-provision of private training by MENA firms: what to Do about It?," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-29, December.

    More about this item

    Keywords

    employment protection legislation; labor market institutions; reforms;

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • O21 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy

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