- We also want to assess whether employers’ perceptions about labor regulations are consistent with _de jure_ EPL across countries.  This allows to see whether empirical results based on surveys and those based on synthetic indicators of formal regulations can be compared.  Even more importantly, assessing the links between perceptions and formal regulations can tell us something about enforcement of rules in different countries. To the extent these links vary depending of firm characteristics and performance, we can shed light on who is most affected by a given regulatory setting.

- Finally, we link the perceived and formal stringency of labor regulations to two possible strategies firms can use to, at least partially, overcome them: making greater use of training to adapt the workforce to changes in technology instead of recurring to the external labor market; and make greater use of temporary employment to increase labor flexibility when regulations of regular contracts are too constraining.

_What makes employers worry about labor regulations?_ Table 3 presents the _generalized ordered logit_ regressions of the perceived constraint of labor regulations drawing from both the WBES and the ICS samples.<sup>25</sup> In this and in Table 4, we present the marginal effects of the independent variables on the probability that the respondent reports labor regulations as no obstacle or as a major obstacle.<sup>26</sup> In the first four columns in Table 3, we only include firms’ characteristics – age, size, geographical area, and ownership – and the country income group as explanatory variables of firms’ perception. Other things being equal, young or small firms appear less concerned with labor regulations, while, older, or medium and large firms (more than 20 employees) are more likely to report that these regulations are an obstacle to their business.

Not surprisingly, firms which are at least partly owned by the government show less concern for labor regulations than those completely private. Large employment adjustments in state-owned enterprises often involve large and generous packages transferring, at least partially, the adjustment costs to taxpayers.

The regional dummies and the income group dummies allow to shed some light on the different degree of enforcement of regulations across countries. Given the unavoidable major labor reallocation coupled and assisted by large use of early retirement and generous mass layoffs schemes in transition economies, it is not surprising to find that, other things being equal, firms in these countries appear the least concerned compared to other regions (except Middle East and North Africa which is not found to differ significantly from firms in transition countries). The results also suggest that the higher

> 25 The different specifications use the largest available sample of firms/countries.  However, to verify the robustness of results across specifications, we also re-run them on the same maximum common sample.  This sensitivity analysis suggests that the results are robust to the use of a smaller common sample.  The results are available from the authors upon request.

> 26 The estimated marginal probabilities that respondents report minor or moderate constraint (i.e. the other two options in the questionnaire of the two surveys) are available from the authors.

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