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Labor Market Regulations and Growth

Author

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  • Oleg Badunenko

    (Portsmouth Business School)

Abstract

This chapter builds a model in which labor market regulations influence labor productivity growth through labor market. The proposed model decomposes labor productivity growth into components attributable to (i) change in efficiency, (ii) technological change, (iii) physical capital deepening, (iv) human capital accumulation, and (v) labor market regulations change. The empirical analysis using data from the Penn World Tables and Economic Freedom of the World Data is performed for 1970-1995 and 1995-2014. The findings can be summarized as follows. First, physical capital deepening is the major driving force behind productivity growth over the entire period. Labor market regulations change contributing next to nothing during 1970-1995, becomes second most important force of economic growth after 1995. Second, relatively rich nations benefit more from labor market regulations change than relatively poor nations. Finally, the contribution of labor market regulations change to growth is stronger for countries with less liberalized labor markets.

Suggested Citation

  • Oleg Badunenko, 2017. "Labor Market Regulations and Growth," Working Papers in Economics & Finance 2017-07, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    • Handle: RePEc:pbs:ecofin:2017-07
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    More about this item

    Keywords

    Data Envelopment Analysis; Efficiency; Economic Freedom of the World Data; Economic Growth; Income Distribution; Labor Market; Labor Market Regulations; Penn World Tables; Physical capital; Productivity;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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