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Labor Market Flexibility and Unemployment: New Empirical Evidence of Static and Dynamic Effects

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IMF – Labor Market Flexibility and Unemployment: New Empirical Evidence of Static and Dynamic Effects, Lorenzo E. Bernal-Verdugo, Davide Furceri, and Dominique Guillaume March 01, 2012

  • “The aim of this paper is to analyze the relationship between labor market flexibility and unemployment outcomes. Using a panel of 97 countries from 1985 to 2008, the results of the paper suggest that improvements in labor market flexibility have a statistically and significant negative impact on unemployment outcomes (over unemployment, youth unemployment and long-term unemployment). Among the different labor market flexibility indicators analyzed, hiring and firing regulations and hiring costs are found to have the strongest effect.”
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