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between EPL (often using the OECD’s EPL index) and labor market outcomes, using crosssectional data over time. Interestingly, most of the earlier studies found a negative effect on employment and, in some cases, unemployment (e.g., Scarpetta 1996; Nickell 1997; Nickell and Layard 1999; Elmeskov, Martin, and Scarpetta 1998). Some more recent studies using this approach have found no significant employment impact (e.g., Baccaro and Rei 2005; Bassanini and Duvall 2006).

There has been some skepticism about whether cross-country regressions using aggregate data can accurately identify the impacts of EPL (and, indeed, other labor market institutions). In recent years, a number of researchers have examined the effect of a regulatory change in a single country using panel data (household or firm) and time-series models. A collection of these studies were compiled for a number of Latin American and Caribbean countries in Heckman and Pagés (2004). The results were not conclusive, with some studies identifying a negative employment effect of job security rules (e.g., Kugler 2004 for Colombia; Saavedra and Torero 2004 for Peru; Mondino and Montoya 2004 for Argentina) while others (Paes de Barros and Corseuil 2004 for Brazil and Downes, Mamingi, and Antoine 2004 for three Caribbean countries) found no significant effect. Using a similar approach, Petrin and Sivadsadan (2006) found that changes in EPL in Chile had no significant impact on employment.

Outside of Latin America, there has been very little analysis of the employment impact of EPL in developing countries. The major exception is India where a number of researchers have exploited the state-level variation in labor regulations (e.g., Besley and Burgess 2004; Gupta, Hasan, and Kumar 2009; Ahsan and Pagés 2009). In general, these studies have shown that states with more protective regulations have significantly lower (formal) employment that states with more flexible rules (World Bank 2010, 2012). To some extent, this research has been complicated by disagreements about the characterization of Indian states in terms of their EPL and, also, by the interaction between EPL and other labor market regulations.<sup>34</sup> Nonetheless, as Freeman (2010: 4673) concludes, “Indian labor institutions ... do more harm than good than the institutions in other countries, though their impact is limited ... due to the huge size of the Indian informal sector.” Some studies discover that employment impacts are significantly affected by interactions between job security rules and other labor market institutions. Unions and collective bargaining appear to be particularly relevant, at least in the OECD. However, there is some disagreement about the mediating effects of unionization. On the one hand, based on aggregate data for 20 OECD countries from 1960-98, the IMF (2003) found that EPL increases unemployment but that effect decreases with increased union density. On the other hand, Belot and van Ours (2000) concluded that EPL increased structural unemployment in OECD countries only when union density was above average. Elmeskov, Martin, and Scarpetta (1998) find that EPL increases structural unemployment in the context of “intermediate” bargaining structures (i.e., in terms of centralization and coordination).

Effects of interactions between institutions are also evident in research on developing countries. For example, Ahsan and Pagés (2009) find that EPL reduces formal sector employment in India 34 See Bhattachargea (2006) for a critique of the Besley-Burgess index.