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Structural Reforms and Labor Market Outcomes: International Panel Data Evidence

42 Pages Posted: 20 Apr 2016  

Claire H. Hollweg

World Bank

Daniel Lederman

World Bank - Latin America and Caribbean Region

Devashish Mitra

Syracuse University - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: November 1, 2014

Abstract

This paper explores the impact of structural reforms on a comprehensive set of macro-level labor-market outcomes, including the unemployment rate, the average wage index, and overall and female employment levels and labor force participation rates. Together these outcome variables capture the overall health of the labor market and the aggregate welfare of workers. Yet, there seems to be no other comprehensive empirical investigation in the existing literature of the impact of structural reforms at the cross-country macro level on labor-market outcomes other than the unemployment rate. Data were collected from a variety of sources, including the World Bank World Development Indicators, the International Monetary Fund International Financial Statistics, and the International Labor Organization Key Indicators of the Labor Market. The resulting dataset covers up to 88 countries, the majority being developing, for 10 years on either side of structural reforms that took place between 1960 and 2001. After documenting the average trends across countries in the labor-market outcomes up to 10 years on either side of each country?s structural reform year, the authors run fixed-effects ordinary least squares as well as instrumental variables regressions to account for the likely endogeneity of structural reforms to labor-market outcomes. Overall the results suggest that structural reforms lead to positive outcomes for labor. Unlike related literature, the paper does not find conclusive evidence on unemployment. Redistributive effects in favor of workers, along the lines of the Stolper-Samuelson effect, may be at work.

Keywords: Employment and Shared Growth, Consumption, Social Protections & Assistance, Economic Theory & Research, International Trade and Trade Rules, Equity and Development, Pro-Poor Growth, Achieving Shared Growth, Fiscal & Monetary Policy, Economic Growth, Industrial Economics

Suggested Citation

Hollweg, Claire H. and Lederman, Daniel and Mitra, Devashish, Structural Reforms and Labor Market Outcomes: International Panel Data Evidence (November 1, 2014). World Bank Policy Research Working Paper No. 7122. Available at SSRN: https://ssrn.com/abstract=2530771

Claire H. Hollweg (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Daniel Lederman

World Bank - Latin America and Caribbean Region ( email )

1818 H Street NW
Washington, DC 20433
United States

HOME PAGE: http://sites.google.com/site/danielledermanworldbank/

Devashish Mitra

Syracuse University - Department of Economics ( email )

The Maxwell School of Citizenship & Public Affairs
133 Eggers Hall
Syracuse, NY 13244-1020
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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