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
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: Suggested Citation
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