Labor Market "Rigidity" and the Success of Economic Reforms Across more than One Hundred Countries

Alvaro Forteza () and Martin Rama

No 600, Documentos de Trabajo (working papers) from Department of Economics - dECON

Abstract: This paper shows that labor market policies and institutions have an impact on the effectiveness of economic reform programs. The analysis compares annual growth rates across 119 countries, using data from 449 adjustment credits and loans given by the World Bank between 1980 and 1996. The results indicate that countries with relatively “rigid” labor markets experienced deeper recessions before adjustment and slower recoveries afterwards. The paper also disentagles the mechanisms through which labor market “rigidity” operates. It finds that minimum wages and mandatory benefits have a marginal impact only. The size and strength of organized labor, on the other hand, appear to be crucial. Labor market rigidity thus seem to be relevant for political reasons, more than for economic reasons. The paper shows that these findings are robust to changes in the sample and specification. Overall, the results suggest that insufficient attention has been paid to the compensation of vocal groups who stand to lose from economic reforms.

Pages: 47 pages
Date: 2000-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

Downloads: (external link)
https://hdl.handle.net/20.500.12008/1916 (application/pdf)

Related works:
Working Paper: Labor market"rigidity"and the success of economic reforms across more than one hundred countries (2001)
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:ude:wpaper:0600

Access Statistics for this paper

More papers in Documentos de Trabajo (working papers) from Department of Economics - dECON Contact information at EDIRC.
Bibliographic data for series maintained by Andrea Doneschi () and ().