Employment protection and labor market results in Europe

Since the 1980s, many European countries have reformed their labor markets, enhancing their flexibility in an attempt to reduce high unemployment rates. However, the empirical evidence on the effectiveness of these reforms is not conclusive. Our paper analyzes the influence of employment protection...

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Bibliographic Details
Published in:Journal of evolutionary economics 2020-04, Vol.30 (2), p.401-449
Main Authors: Ferreiro, Jesus, Gomez, Carmen
Format: Article
Language:English
Subjects:
Capital formation
Economic activity
Economic conditions
Economic crisis
Economic Growth
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Employment
Employment law
Entrepreneurship
Flexibility
GDP
Gross Domestic Product
Institutional/Evolutionary Economics
Labor market
Legislation
Microeconomics
R & D/Technology Policy
Regular Article
Unemployment
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Summary:Since the 1980s, many European countries have reformed their labor markets, enhancing their flexibility in an attempt to reduce high unemployment rates. However, the empirical evidence on the effectiveness of these reforms is not conclusive. Our paper analyzes the influence of employment protection legislation and changes in economic activity on the evolution of employment and unemployment rates registered in European Union countries from 1999 to 2012. Furthermore, we analyze whether the impact of economic activity and employment protection has changed during the economic crisis following the onset of the Global Financial Crisis. Our results show that the existence of a significant impact of employment protection on employment and unemployment depends on the selection made of the sample of countries and years analyzed and on the economic variables representing economic activity (Gross Domestic Product vs Gross Fixed Capital Formation). Furthermore, when a significant impact is obtained, the direction of this impact is contrary to what is argued in mainstream analysis because a higher protection of permanent and temporary workers has a positive impact on the evolution of employment and unemployment.
ISSN:0936-9937
1432-1386
DOI:10.1007/s00191-019-00656-5