A revised version of the working paper has been published as “Drivers and effects of labour market reforms: Evidence from a novel policy compendium” in the IZA Journal of Labor Policy, 2016, 5:15
The paper analyses the determinants and effects of labour market reforms, using a unique policy inventory that covers 111 developed and developing economies between 2008 and 2014. The results show that in developed economies, reforms were mostly directed towards relaxing labour regulation and were driven by high unemployment rates and low levels of GDP growth. In developing economies, reforms tended to increase workers’ protection and were more likely to occur in countries experiencing high levels of GDP growth – while not being sensitive to unemployment rates. Furthermore, we test the effects of these reforms on labour market outcomes over the short run. We find that deregulation decreases employment rates in both developed and developing countries in the year after implementation. Deregulation also increases unemployment rates in developed economies in the short-term; while the effect is not statistically significant in developing countries.
