Employment Protection and Business Cycles in Emerging Economies

Ruy Lama and Carlos Urrutia ()

No 1105, Working Papers from Centro de Investigacion Economica, ITAM

Abstract: We build a small open economy, real business cycle model with labor market frictions to evaluate the role of employment protection in shaping business cycles in emerging economies. The model features matching frictions and an endogenous selection effect by which inefficient jobs are destroyed in recessions. In a quantitative version of the model calibrated to the Mexican economy we find that reducing separation costs to a level consistent with developed economies would reduce output volatility by 15 percent. We also use the model to analyze the Mexican crisis episode of 2008 and conclude that an economy with lower separation costs would have experienced a smaller drop in output and in measured total factor productivity with no significant change in aggregate employment.

Pages: 37 pages
Date: 2011
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://ftp.itam.mx/pub/academico/inves/urrutia/11-05.pdf (application/pdf)

Related works:
Working Paper: Employment Protection and Business Cycles in Emerging Economies (2012)
Working Paper: Employment Protection and Business Cycles in Emerging Economies (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cie:wpaper:1105

Access Statistics for this paper

More papers in Working Papers from Centro de Investigacion Economica, ITAM Contact information at EDIRC.
Bibliographic data for series maintained by Diego Dominguez ().