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

Abstract

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.

Keywords: Labor Market, Flexibility, Unemployment, Reforms, Financial Crises, Labor Markets, Oecd, Analysis Of Collective Decision-making

JEL Classification: E29, J60, E32