IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/63329.html
   My bibliography  Save this paper

The Impact of Employment Protection Legislation on the Unemployment Rate in Selected OECD Countries

Author

Listed:
  • Can, Raif

Abstract

The findings of the existing literature on the relationship between employment protection legislation and the unemployment rate are mixed. This study analyzes the relationship between employment protection legislation measured by the OECD Employment Protection Index and the unemployment rate between 2001 and 2008. After controlling country fixed effects, I find that more stringent employment protection legislation may not be a significant factor for higher a unemployment rate. The estimated model included output gap, government size, openness of the economy, real minimum wages, urbanization rate, population density, population, unemployment benefit generosity, and tax wedge as explanatory variables. I find that the output gap, as a measure of business cycle, and government size are significant factors determining the unemployment rate in selected 15 OECD countries. These findings suggest that employment protection legislation, especially in developed countries, may not be affective policy instrument for policy makers when combating unemployment.

Suggested Citation

  • Can, Raif, 2015. "The Impact of Employment Protection Legislation on the Unemployment Rate in Selected OECD Countries," MPRA Paper 63329, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:63329
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/63329/1/MPRA_paper_63329.pdf
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    as
    1. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    2. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
    3. Carmen Pagés-Serra, 2000. "The Cost of Job Security Regulation: Evidence from Latin American Labor Markets," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2000), pages 109-154, August.
    4. Solon, Gary R, 1985. "Work Incentive Effects of Taxing Unemployment Benefits," Econometrica, Econometric Society, vol. 53(2), pages 295-306, March.
    5. Adriana Kugler, 1999. "The Impact of Firing Costs on Turnover and Unemployment: Evidence from the Colombian Labour Market Reform," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(3), pages 389-410, August.
    6. Edward P. Lazear, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 699-726.
    7. Samuel Bentolila & Giuseppe Bertola, 1990. "Firing Costs and Labour Demand: How Bad is Eurosclerosis?," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 381-402.
    8. 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.
    9. Carmen Pagés-Serra & James J. Heckman, 2000. "The Cost of Job Security Regulation: Evidence from Latin American Labor Markets," Research Department Publications 4227, Inter-American Development Bank, Research Department.
    10. Andrea Bassanini & Romain Duval, 2006. "Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions," OECD Social, Employment and Migration Working Papers 35, OECD Publishing.
    11. Dominique Paturot & Kirsti Mellbye & Bert Brys, 2013. "Average Personal Income Tax Rate and Tax Wedge Progression in OECD Countries," OECD Taxation Working Papers 15, OECD Publishing.
    12. Horst Siebert, 1997. "Labor Market Rigidities: At the Root of Unemployment in Europe," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 37-54, Summer.
    13. Lee E. Ohanian, 2010. "The Economic Crisis from a Neoclassical Perspective," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 45-66, Fall.
    14. Horst Feldmann, 2006. "Government Size and Unemployment: Evidence from Industrial Countries," Public Choice, Springer, vol. 127(3), pages 443-459, June.
    15. Pissarides, Christopher A., 2001. "Employment protection," Labour Economics, Elsevier, vol. 8(2), pages 131-159, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Employment protection; unemployment; labor market flexibility;

    JEL classification:

    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • J83 - Labor and Demographic Economics - - Labor Standards - - - Workers' Rights

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:63329. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.