Labor Market Flexibility and Unemployment: New Empirical Evidence of Static and Dynamic Effects

ByLorenzo E. Bernal-Verdugo, Davide Furceri, Dominique M. Guillaume

March 1, 2012

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The aim of this paper is to analyze the relationship between labor market flexibility and unemployment outcomes. Using a panel of 97 countries from 1985 to 2008, the results of the paper suggest that improvements in labor market flexibility have a statistically and significant negative impact on unemployment outcomes (over unemployment, youth unemployment and long-term unemployment). Among the different labor market flexibility indicators analyzed, hiring and firing regulations and hiring costs are found to have the strongest effect.

Subject: Labor market flexibility, Labor market institutions, Labor markets, Unemployment, Unemployment rate

Keywords: flexibility indicator, unemployment outcome, WP

Pages:
28
Volume:
2012
DOI:
https://doi.org/10.5089/9781463938413.001
Issue:
064
Series:
Working Paper No. 2012/064
Stock No:
WPIEA2012064
ISBN:
9781463938413
ISSN:
1018-5941

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