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Before It Gets Better: The Short-Term Employment Costs of Regulatory Reforms

Andrea Bassanini () and Federico Cingano

No 11011, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: We exploit long time series of industry-level data in a group of OECD countries to analyze the short-term labor market effects of reforms lowering barriers to entry and dismissal costs. Our estimates show that both policies induce non-negligible transitory employment losses, a result that is confirmed by complementary evidence from case studies of three recently implemented EPL reforms. The strength of these effects varies depending on the underlying industry and labor market structure, and on cyclical conditions: the employment cost of deregulation is higher in economic downturns, negligible in good times. These findings prove robust to a set of specification and sensitivity checks, and are confirmed after standard reverse causality and falsification tests.

Keywords: product market regulation; EPL; employment losses; industry data (search for similar items in EconPapers)
JEL-codes: J23 L51 L11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-lma
Date: 2017-09
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Forthcoming in: Industrial and Labor Relations Review, 2018

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