Labor Market Regulations : What Do We Know about Their Impacts in Developing Countries?
Labor market regulation is a high-profile, and often contentious, area of public policy. Although these regulations have been studied most extensively in developed countries, there is a growing body of literature on their effects in developing coun...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2014/03/19303517/labor-market-regulations-know-impacts-developing-countries http://hdl.handle.net/10986/17732 |
| Summary: | Labor market regulation is a
high-profile, and often contentious, area of public policy.
Although these regulations have been studied most
extensively in developed countries, there is a growing body
of literature on their effects in developing countries. This
paper reviews that literature and focuses on the impacts of
two important types of labor market regulation, minimum
wages and employment protection legislation (EPL), on
employment, earnings, and productivity. Strong and opposing
views exist regarding the costs and benefits of these
regulations, but the results of this review suggest that
their impacts are generally smaller than the heat of the
debates would suggest. Efficiency effects are found
sometimes, but not always, and the effects can be in either
direction and are usually modest. The distributional impacts
of both minimum wage and employment protection legislation
are clearer, with two effects predominating: an equalizing
effect among covered workers, but with groups such as youth,
women, and the less skilled disproportionately outside the
coverage and its benefits. Although the overall conclusion
is one of modest effects in most cases, the policy
implication is not that these regulations do not matter. On
the one hand, both minimum wages and EPL can affect
distributional objectives. On the other hand, these
regulations can generate undesirable economic or social
impacts if they are established or operate in ways that
exacerbate the labor market imperfections that they were
designed to address. |
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