Fajnzylber et al (2009) find that investment climate variables have a significant effect on growth and productivity in LAC, and Loayza and Servén (2010) find similar results globally.

# _Labor markets_

In the early to mid-1990s, Congress passed two labor reform laws. In 1991, a reform introduced fixed-term contracts and special-training contracts for young workers.<sup>52</sup> In 1995, a second reform introduced a trial period for all contracts, established special contracts to promote the employment of certain age groups, and a special, more flexible labor regime for small firms.

<mark>In 2000, shortly after entering office, the de la Rúa regime secured passage of a labor reform law, as noted above in the macroeconomic section. The new law allowed large companies to increase the prevailing 30-day probationary period for new hires to six months. Small businesses could extend the probationary period to one year. During the probationary period, workers could be dismissed without benefits. Payroll taxes on newly hired workers would be reduced to 12 percent from 17.5 percent.</mark><sup>53</sup> <mark>C</mark> ompensation for unfair dismissal was also simplified and dismissal notice periods were reduced from 30 to 15 days. Collective bargaining was decentralized substantially: “....the monopoly of representation granted to unions with _personería gremial_ (legal recognition) was maintained, but first- and second-degree organizations (unions and federations) could delegate negotiation power to local representatives, consecrating the decentralized collective bargaining process.”<sup>54</sup> <mark>In 2004, the law from 2000 was revoked by Article 1 of Law 25.877. Despite the outright revocation of the earlier legislation, the new law laid out measures that were not all completely different from the earlier law. For example, the probation period was set for 3 months – somewhere in between the six months of the 2000 reform and the 30 days preceding the 2000 reform. Firms with 80 workers or fewer were granted a reduction in payroll contributions. Firms with more than 300 workers have to present a “social balance”--describing working conditions, the status of the firm, etc.,--thus imposing new burdensome reporting requirements.</mark> <mark>Since 2004, there have been a number of additional labor-related reforms, mostly intended to regularize informal sector workers. Law 26.476 of 2008 exempted firms from paying any fines for registering up to 10 previously informal workers. For firms regularizing more than ten workers, the conditions for paying fines and back taxes were established. Following that law, there were a number of resolutions and decrees to provide details on precisely how fines would be levied when regularizing workers. In 2014, Law 26.940 established a public registry of employers under sanction from the Ministry of Labor for failing to register workers, failing to pay payroll contributions in full or failing to comply with other legal labor standards.</mark> <mark>In recent years, there has been renewed debate about labor reforms. For example, under consideration is raising the number of days that fathers have for paternity leave from 15 days to a higher number. There is also debate about raising the minimum termination benefits for workers.</mark>

> 52 See Hopenhayn, 2004.

> 53 Law 25.250.

> 54 Cardoso and Gindin, 2009, page 5.

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