# **Notes**

Gordon Betcherman is a Professor in the School of International Development and Global Studies at the University of Ottawa. E-mail address <u>Gordon.Betcherman@uottawa.ca. The research for the preparation of this article was</u> largely undertaken while the author was a member of the core team for the 2013 World Development Report: Jobs. The author acknowledges comments and feedback offered by the WDR team, by participants in various seminars at the World Bank, and by numerous commentators on the WDR inside and outside the World Bank. The opinions expressed in this article do not necessarily represent the views of the World Bank, its Executive Directors, or the countries they represent. This research, in a more preliminary form, was initially released as a background paper for the 2013 World Development Report and subsequently was published as a World Bank Policy Research Paper. The author appreciates the comments and suggestions of three anonymous reviewers of the original submission of this article.

> 1 The _2013 World Development Report_ (World Bank 2012) proposes that jobs affect not only living standards and productivity but also social cohesion. To the extent that labor policies have an impact on jobs, a complete assessment of labor regulations should include effects on social cohesion. 2 One example of this type of analysis is Eichhorst et al _._ (2010).

> 3 IFC’s Doing Business “employing workers” index, which covers EPL as well as other regulations, has been particularly controversial in terms of what it measures and its implications for policy. See Berg and Cazes (2007) for an early discussion. In response to criticisms, the World Bank Group created a consultative group to study the index. It has also been assessed in the Independent Panel Review of Doing Business Report (2013). Because of the controversies, the employing workers index is not currently included in the overall Doing Business country scoring and ranking.

> 4 Freeman (2005) proposes laboratory experiments and simulations of artificial agent modelling as well as the use of micro data. Heckman (2007) sees the next steps as expanding the database and using cost-based measures of institutions as well as more sophisticated modelling.

> 5 For a complete treatment of this research, including the particularly influential New Jersey-Pennsylvania fast food study, see Card and Krueger (1995).

> 6 Although the vast majority of U.S. economists accepted the proposition a generation ago that higher minimum wages led to lower employment, there has recently been less consensus (Fuller and Geide-Stevenson 2003).

> 7 This is admittedly a somewhat simplified depiction of dual labor markets in developing countries. As Fields (2005) explains, there are variations of this model, with different assumptions about wages and unemployment in the two sectors.

> 8 An interesting, but rarely studied, question is how the labor supply of other household members adjusts to job loss when it occurs. One exception is Neumark et al _._ (2006), who found that other household members increased their participation in the labor force.

> 9 There is essentially no evidence on whether non-wage benefits decrease because of these wage gains.

> 10 The increased training incentives may be counteracted by the reduced room for employers to shift (specific) training costs onto workers through wage shifting if the minimum wage has been increased. Overall, the evidence on the relationship between minimum wages and training is inconclusive (OECD 2007a).

> 11 Particularly relevant are the rules governing whether and how workers can be dismissed for “economic” reasons (e.g., due to shrinking markets or increasing competitiveness). This class of terminations stands in contrast to dismissals for “noneconomic” reasons such as job performance.

> 12 There is now a body of literature on this so-called “partial reform” and new proposals to unify “insider-outsider” labor markets, especially in southern Europe, where this phenomenon is most prevalent (e.g., Bentolila et al _._ 2011 for Spain; Boeri 2011 for Italy; Cahuc and Kramarz 2004 for France).

13 It should be noted that employment and unemployment impacts are not always the same. Where job security has a negative impact on labor demand, employment will almost certainly decrease, but unemployment may not be affected if the decreased labor demand leads to a reduced labor supply.

> 14 It should be noted that India’s scores on permitting temporary contracts, which is the other component of the OECD EPL index, were around the OECD average.

> 15 Examples of modified state indices include Ahsan and Pagés (2009), OECD (2007b), Dougherty (2009), and Gupta et al _._ (2009).

> 16 Ahsan and Pagés (2009) distinguish between EPL rules that make labor adjustment more costly and those that increase the cost of dispute resolution. They find that the former effect is more important.

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