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Before It Gets Better: The Short-Term Employment Costs of Regulatory Reforms

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  • Andrea Bassanini
  • Federico Cingano

Abstract

The article exploits long time series of industry-level data in a group of OECD countries to analyze the short-term labor market effects of reforms that lower barriers to entry and dismissal costs. Estimates show that both policies induce non-negligible transitory employment losses. The strength of these effects varies depending on the underlying industry and labor market structure, and on cyclical conditions: The employment cost of deregulation is higher in economic downturns and negligible in good times. These findings prove robust to a set of specification and sensitivity checks and are confirmed after standard reverse causality and falsification tests.

Suggested Citation

  • Andrea Bassanini & Federico Cingano, 2019. "Before It Gets Better: The Short-Term Employment Costs of Regulatory Reforms," ILR Review, Cornell University, ILR School, vol. 72(1), pages 127-157, January.
    • Handle: RePEc:sae:ilrrev:v:72:y:2019:i:1:p:127-157
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    References listed on IDEAS

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    Cited by:

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    3. Bottasso, Anna & Bratti, Massimiliano & Cardullo, Gabriele & Conti, Maurizio & Sulis, Giovanni, 2023. "Labor Market Regulation and Firm Adjustments in Skill Demand," IZA Discussion Papers 16262, Institute of Labor Economics (IZA).
    4. Alberto Alesina & Davide Furceri & Jonathan D Ostry & Chris Papageorgiou & Dennis P Quinn, 2024. "Structural Reforms and Elections: Evidence from a World-Wide New Dataset," Journal of the European Economic Association, European Economic Association, vol. 22(4), pages 1936-1980.
    5. Bouis, Romain & Duval, Romain & Eugster, Johannes, 2020. "How fast does product market reform pay off? New evidence from non-manufacturing industry deregulation in advanced economies," Journal of Comparative Economics, Elsevier, vol. 48(1), pages 198-217.
    6. Thommen, Yann, 2022. "Reforms of collective bargaining institutions in European Union countries: Bad timing, bad outcomes?," European Journal of Political Economy, Elsevier, vol. 71(C).
    7. Romain Duval & Davide Furceri & Joao Jalles, 2020. "Job protection deregulation in good and bad times," Oxford Economic Papers, Oxford University Press, vol. 72(2), pages 370-390.
    8. Matteo Bugamelli & Francesca Lotti & Monica Amici & Emanuela Ciapanna & Fabrizio Colonna & Francesco D�Amuri & Silvia Giacomelli & Andrea Linarello & Francesco Manaresi & Giuliana Palumbo & Filippo , 2018. "Productivity growth in Italy: a tale of a slow-motion change," Questioni di Economia e Finanza (Occasional Papers) 422, Bank of Italy, Economic Research and International Relations Area.

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    More about this item

    Keywords

    employment; short-term costs; job destruction; labor market regulation; product market regulation;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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