Does Employment Protection Lead to Unemployment? A Panel Data Analysis of OECD Countries, 1990-2008

28 Pages Posted: 23 Dec 2011 Last revised: 11 Jul 2012

See all articles by Prabirjit Sarkar

Prabirjit Sarkar

University of Cambridge - Centre for Business Research (CBR)

Date Written: December 23, 2011

Abstract

This paper analyzed the OECD data on employment protection for 23 OECD countries over the time span 1990-2008 on the basis of alternative dynamic panel data models and panel causality tests and examines the validity of the neo-liberal argument that strictness of employment protection hurts labor through increased long-term and youth unemployment rates. While it finds no empirical basis for this orthodox standpoint it observes that long-term unemployment dampens aggregate production which in turn aggravates unemployment problem.

Keywords: labour law, regular job protection, temporary job protection, unemployment rate, long-term unemployment, youth unemployment

JEL Classification: K31, J08, J50, J60, J83

Suggested Citation

Sarkar, Prabirjit, Does Employment Protection Lead to Unemployment? A Panel Data Analysis of OECD Countries, 1990-2008 (December 23, 2011). Available at SSRN: https://ssrn.com/abstract=1976214 or http://dx.doi.org/10.2139/ssrn.1976214

Prabirjit Sarkar (Contact Author)

University of Cambridge - Centre for Business Research (CBR) ( email )

Cambridge
United Kingdom

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