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Effects of Flexibility-Enhancing Reforms on Employment Transitions

Author

Listed:
  • Boris Cournède
  • Oliver Denk
  • Paula Garda

Abstract

Do flexibility-enhancing reforms imply more employment instability? Using individual-level data from harmonised household surveys for 26 advanced countries, this paper analyses the effects of product and labour market reforms on transitions in and out of employment. Results indicate that reforms making product markets more competitive increase transitions out of employment for less qualified and low-income workers. Less qualified and low-income workers have very high job exit rates to start with, and reforms raise these rates further. On the other hand, more pro-competitive product market regulation generally increases entry rates into employment. The concentration on less qualified and low-income workers of the increase in labour market turnover associated with product market reforms suggests a case for accompanying such reforms with labour market programmes that help the most vulnerable workers transition to new jobs. Easing employment protection for regular or temporary workers has no systematic long-term effect on workers’ probabilities to move in or out of employment. Such reforms can, however, affect employment transitions through their interaction with other policies and institutions. For example, easing employment protection for workers with regular contracts raises the job-finding chances of people out of work in countries that invest a lot in active labour market programmes. Furthermore, employment protection legislation and product market regulation are complementary in that, when either employment protection or product markets are lightly regulated, reforming the other is associated with fewer job exits. Les mesures de flexibilité et leurs effets sur les transitions professionnelles Les réformes visant à accroître la flexibilité des marchés sont-elles porteuses d’instabilité en matière d’emploi ? À l’aide de données individuelles tirées d’enquêtes harmonisées menées auprès des ménages dans 26 pays avancés, cet article analyse les effets que peuvent avoir les réformes du marché du travail et du marché des produits sur les transitions professionnelles. Les résultats montrent que les réformes qui améliorent la compétitivité des marchés de produits augmentent les pertes d’emploi parmi les travailleurs peu qualifiés et à bas salaire, dont les taux de sortie, déjà élevés au départ, le sont encore plus à l’arrivée. D’un autre côté, une réglementation plus favorable à la concurrence sur les marchés de produits se traduit généralement par une hausses des taux d’accès à l’emploi. La concentration sur certaines catégories de travailleurs, en l’occurrence les moins qualifiés et les moins bien rémunérés, de l’augmentation du taux de rotation de la main-d’oeuvre associé aux réformes des marchés de produits plaide en faveur de la mise en place, en complément de ces réformes, de programmes du marché du travail visant à faciliter le retour à l’emploi des travailleurs les plus vulnérables. L’assouplissement des mesures de protection de l’emploi permanent ou temporaire n’a pas d’effet systématique à long terme sur la probabilité de passer du chômage à l’emploi ou inversement. Ce type de réforme peut toutefois avoir une incidence sur les transitions professionnelles de par ses interactions avec d’autres politiques et institutions. On s’aperçoit ainsi qu’une protection moins stricte des contrats à durée indéterminée augmente les chances de trouver un emploi dans les pays où les programmes actifs du marché du travail sont très développés. De plus, la complémentarité de la législation sur la protection de l’emploi et de la réglementation des marchés de produits fait que l’assouplissement de l’une permet de réformer l’autre en réduisant les pertes d’emploi.

Suggested Citation

  • Boris Cournède & Oliver Denk & Paula Garda, 2016. "Effects of Flexibility-Enhancing Reforms on Employment Transitions," OECD Economics Department Working Papers 1348, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:1348-en
    DOI: 10.1787/bd8e4c1f-en
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    File URL: https://doi.org/10.1787/bd8e4c1f-en
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    Cited by:

    1. Anderton, Robert & Di Lupidio, Benedetta, 2019. "Effects of labour and product market regulation on worker flows: evidence for the euro area using micro data," Working Paper Series 2312, European Central Bank.
    2. Robert Anderton & Benedetta Di Lupidio, 2019. "Effects of labour and product market regulation on worker flows: Evidence for the euro area using micro data," Discussion Papers 2019-01, University of Nottingham, GEP.
    3. Alessandro Bellocchi & Giovanni Marin & Giuseppe Travaglini, 2021. "The Great Fall of Labor Share:Micro Determinants for EU Countries Over 2011-2019," Working Papers 2102, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2021.
    4. Alina HAGIU & Marinela BARBULESCU, 2019. "The Business Environment In Romania Compared To Europe And Central Asia," Scientific Bulletin - Economic Sciences, University of Pitesti, vol. 18(2), pages 26-35.

    More about this item

    Keywords

    employment protection legislation; labour market; micro data; product market regulation; structural reform;
    All these keywords.

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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