The Dynamics of the Regulation of Labor in Developing and Developed Countries since 1960
 
            with Jeffrey B Nugent

            This paper examines both the determinants and the effects of changes in the rigidity of labor market legislation
            across countries over time. Recent research identifies the origin of the legal system as being a major determinant
            of the cross-country variation in the rigidity of employment protection legislation. However, the supporting evidence
            is largely confined to levels of regulation and is almost exclusively based on international cross-section data for the
            post-1995 period. This paper introduces a new index capturing the rigidity of employment protection legislation
            (LAMRIG) for an unbalanced panel of more than 140 countries over time starting in 1960. Although the importance of
            legal origins in explaining the level of rigidity of labor regulations across countries is replicated using LAMRIG, their
            explanatory power is much weakened for changes over time (1960-2004.) More important as determinants of such
            changes are the level of development and other reforms such as trade liberalization. With respect to the effects of
            changes in the rigidity of labor regulations on growth and inequality, which have been very controversial in the literature,
            results with LAMRIG support Freemanís conjecture that changes in rigidity do not systematically affect
            economic growth but do lower income inequality.

            LATEST VERSION: September 2012    PDF

            Appendix (list of labour laws for LAMRIG):   PDF

            DATA:      LAMRIG in Stata     DTA                 LAMRIG in Excel    XLS


            Are you a keen follower of changes in labour market regulation? And who isn't? Then there's only one place to get your
            fix: check this out!
 

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