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Impact of Labor Market Institutions on Unemployment: Results from a Global Panel

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Abstract

Policies and programs designed to protect workers may, paradoxically, have a negative impact on labor as a whole by increasing unemployment. A key question is which policies have this effect. Using a 3-year panel of 90 countries, the study finds that the unemployment rate is affected by the existence, duration, and replacement rate of unemployment insurance. Hiring and retrenchment regulations and the nature of collective bargaining, however, are not significantly correlated with unemployment. These results are broadly in line with the extensive literature on countries of the Organisation for Economic Co-operation and Development but are at odds with the few cross-country studies that have considered a wider sample. These findings question again whether the deregulation of labor markets in developing countries will improve labor market outcomes.

Suggested Citation

  • Vandenberg, Paul, 2010. "Impact of Labor Market Institutions on Unemployment: Results from a Global Panel," ADB Economics Working Paper Series 219, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0219
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    Citations

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    Cited by:

    1. John Anyanwu, 2014. "Working Paper 201 - Does Intra-African Trade Reduce Youth Unemployment in Africa ?," Working Paper Series 2107, African Development Bank.
    2. Robert Dixon & G. C. Lim & Jan C. van Ours, 2017. "Revisiting the Okun relationship," Applied Economics, Taylor & Francis Journals, vol. 49(28), pages 2749-2765, June.
    3. Selçuk GÜL, 2013. "Institutional Rigidities and Their Effects on Labor Demand in Turkey," Sosyoekonomi Journal, Sosyoekonomi Society, issue 20(20).
    4. Shanthi Nataraj & Francisco Perez-Arce & Krishna B. Kumar & Sinduja V. Srinivasan, 2014. "The Impact Of Labor Market Regulation On Employment In Low-Income Countries: A Meta-Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 28(3), pages 551-572, July.
    5. Anna Ivanova, 2012. "Current Account Imbalances: Can Structural Policies Make a Difference?," IMF Working Papers 2012/061, International Monetary Fund.
    6. Stephen Golub & Aly Mbaye & Hanyu Chwe, 2015. "Labor Market Regulations in Sub-Saharan Africa, With a Focus on Senegal," Working Papers 201505, University of Cape Town, Development Policy Research Unit.
    7. John C. Anyanwu, 2014. "Does Intra‐African Trade Reduce Youth Unemployment in Africa?," African Development Review, African Development Bank, vol. 26(2), pages 286-309, June.

    More about this item

    Keywords

    labor market; unemployment; regulation; institutions;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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