The Employment Effects of Labor and Product Markets Deregulation and their Implications for Structural Reform

Helge Berger () and Stephan Danninger ()

No 1709, CESifo Working Paper Series from CESifo

Abstract: This study explores the effects of labor and product market deregulation on employment growth. Our empirical results, based on an OECD country panel from 1990-2004, suggest that lower levels of product and labor market regulation foster employment growth, including through sizable interaction effects. Based on these findings, the paper develops a theoretical framework for evaluating deregulation strategies in the presence of reform costs. Optimal deregulation takes various forms depending on the deregulation costs and the strength of reform interactions. Compared to the first best, decentralized decision-making based on a partial market-by-market perspective can lead to excessive or insufficient regulation, depending on the design of the decision process. Securing the first best requires not only coordinating deregulation activities across sectors but also overcoming the partial perspective of decision makers.

Keywords: product market regulation; labor market regulation; employment growth; policy coordination; sequencing (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-mac and nep-reg
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Citations: View citations in EconPapers (17)

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Journal Article: The Employment Effects of Labor and Product Market Deregulation and Their Implications for Structural Reform (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_1709

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