## Job Protection Deregulation in Good and Bad Times

_IMF Working Papers, December 14, 2017_

## Source details

**Canonical URL:** [Job Protection Deregulation in Good and Bad Times](https://www.imf.org/en/publications/wp/issues/2017/12/14/job-protection-deregulation-in-good-and-bad-times-45478)

## Other formats

- [Markdown version](/en/publications/wp/issues/2017/12/14/job-protection-deregulation-in-good-and-bad-times-45478/index.md)
- [Structured JSON version](/en/publications/wp/issues/2017/12/14/job-protection-deregulation-in-good-and-bad-times-45478/index.json)
- [Bundle manifest](/en/publications/wp/issues/2017/12/14/job-protection-deregulation-in-good-and-bad-times-45478/bundle-manifest.json)

## Bibliographic details
- Authors: Romain A Duval, Davide Furceri, João Tovar Jalles
- Published: December 14, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484333013.001

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### Overview
- Title: Job Protection Deregulation in Good and Bad Times
- Authors: Romain A Duval, Davide Furceri, João Tovar Jalles
- Date: December 14, 2017
- Primary question: How does deregulating job protection for regular workers affect short-term employment, and how does this effect vary with prevailing business cycle conditions?

### Data and Method
- Coverage: major regular job protection reforms covering 26 advanced economies over the past four decades.
- Unit of analysis: country-sector-level data.
- Identification strategy: relies on the assumption that stringent dismissal regulations are more binding in sectors characterized by a higher “natural” propensity to regularly adjust their workforce.
- Econometric approach: local projection method applied to a newly constructed “narrative” dataset of reforms.

### Key Findings
- The responses of sectoral employment to large job protection deregulation shocks depend crucially on the state of the economy at the time of reform:
  - Positive employment responses in an expansion.
  - Negative employment responses in a recession.
- Findings are consistent with theoretical predictions about differential effects by business cycle state.

### Robustness and Additional Analysis
- Results are robust to a broad range of robustness checks.
- Instrumental Variable approach: uses political economy drivers of reforms as instruments; conclusions remain robust under this IV strategy.

### Policy Implications and Recommendations
- The analysis provides a case for:
  - Undertaking job protection reform in good times.
  - Designing job protection reform in ways that enhance its short-term impact when implemented (implicitly to mitigate adverse effects in recessions).

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## Content in this bundle

- **Job Protection Deregulation in Good and Bad Times, WP/17/277, December 2017**
  - [Job Protection Deregulation in Good and Bad Times, WP/17/277, December 2017 (Markdown version)](/-/media/files/publications/wp/2017/wp17277.pdf.md){rel="alternate" type="text/markdown"}
  - [Job Protection Deregulation in Good and Bad Times, WP/17/277, December 2017 (PDF)](/-/media/files/publications/wp/2017/wp17277.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/wp/issues/2017/12/14/job-protection-deregulation-in-good-and-bad-times-45478_