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Does an employment protection law lead to unemployment? A panel data analysis of OECD countries, 1990–2008

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  • Prabirjit Sarkar

Abstract

This article examines the unemployment consequences of an employment protection law (EPL) on the basis of OECD EPL indicators for 23 OECD countries over the period 1990–2008. Using the alternative dynamic panel data models and panel causality tests, it examines the validity of the neo-liberal argument that strictness of employment protection hurts labour through increased long-term and youth unemployment rates. Although it finds little empirical basis for this orthodox standpoint, the article observes that the unemployment problem dampens aggregate production, which in turn aggravates the long-term unemployment problem. The policy prescription suggested is employment generation by other means than neo-liberal 'hire and fire' labour regulations. Copyright , Oxford University Press.

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  • Prabirjit Sarkar, 2013. "Does an employment protection law lead to unemployment? A panel data analysis of OECD countries, 1990–2008," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 37(6), pages 1335-1348.
    • Handle: RePEc:oup:cambje:v:37:y:2013:i:6:p:1335-1348
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    File URL: http://hdl.handle.net/10.1093/cje/bes093
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    Cited by:

    1. Deakin, Simon & Sarkar, Prabirjit & Siems, Mathias, 2018. "Is There a Relationship Between Shareholder Protection and Stock Market Development?," Journal of Law, Finance, and Accounting, now publishers, vol. 3(1), pages 115-146, May.
    2. Sarkar, Prabirjit, 2020. "Does labor regulation reduce total and youth employment?," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 374-381.
    3. Heywood, John S. & O'Mahony, Mary & Siebert, W. Stanley & Rincon-Aznar, Ana, 2018. "The Impact of Employment Protection on the Industrial Wage Structure," IZA Discussion Papers 11788, Institute of Labor Economics (IZA).
    4. Harlan Holt & Joshua R. Hendrickson, 2017. "Turning Pink Slips Into Red Tape: The Unintended Effects Of Employment Protection Legislation," Contemporary Economic Policy, Western Economic Association International, vol. 35(3), pages 421-438, July.
    5. Giovanni S. F. Bruno & Misbah Choudhry Tanveer & Enrico Marelli & Marcello Signorelli, 2017. "The short- and long-run impacts of financial crises on youth unemployment in OECD countries," Applied Economics, Taylor & Francis Journals, vol. 49(34), pages 3372-3394, July.
    6. Simon Deakin & Colin Fenwick & Prabirjit Sarkar, 2013. "Labour Law & Inclusive Development: the Economic Effects of Industrial Relations Laws in Middle-Income Countries," Working Papers wp447, Centre for Business Research, University of Cambridge.

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