Labor Market Flexibility and Unemployment: New Empirical Evidence of Static and Dynamic Effects

Lorenzo Bernal-Verdugo, Davide Furceri and Dominique Guillaume ()
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Dominique Guillaume: International Monetary Fund, 700 19th Street NW, 20431 Washington DC, USA.

Comparative Economic Studies, 2012, vol. 54, issue 2, 273 pages

Abstract: The aim of this paper is to analyze the relationship between labor market flexibility and unemployment outcomes. Using a panel of 97 countries from 1985 to 2008, the results of the paper suggest that improvements in labor market flexibility have a statistically and significant negative impact on unemployment outcomes (over unemployment, youth unemployment, and long-term unemployment). Among the different labor market flexibility indicators analyzed, hiring and firing regulations and hiring costs are found to have the strongest effect.

Date: 2012
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