Effective labor regulation and microeconomic flexibility
By: Ricardo J. Caballero ... [et al.].
Contributors: Caballero, Ricardo J.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10744; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10744.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Labor laws and legislation.; Microeconomics.
Description: "Microeconomic flexibility, by facilitating the process of creative-destruction, is at the core of economic growth in modern market economies.  The main reason for why this process is not infinitely fast, is the presence of adjustment costs, some of them technological, other institutional.  Chief among the latter is labor market regulation.  While few economists would object to such a view, its empirical support is rather weak.  In this paper we revisit this hypothesis and find strong evidence for it.  We use a new sectoral panel for 60 countries and a methodology suitable for such a panel.  We find that job security regulation clearly hampers the creative-destruction process, especially in countries where regulations are likely to be enforced.  Moving from the 20th to the 80th percentile in job security, in countries with strong rule of law, cuts the annual speed of adjustment to shocks by a third while shaving off about one percent from annual productivity growth.  The same movement has negligible effects in countries with weak rule of law"--National Bureau of Economic Research web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 1/11/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.