Pending Issues in Protection, Productivity Growth, and Poverty Reduction

34 Pages Posted: 13 Jan 2006

See all articles by Omar Arias

Omar Arias

World Bank

Andreas Blom

World Bank

Mariano Bosch Mossi

World Bank

Wendy Cunningham

World Bank

Ariel Fiszbein

World Bank - Human Development Network

Gladys Lopez-Acevedo

Lead Economist

William F. Maloney

World Bank - Poverty and Economic Management Unit; IZA Institute of Labor Economics; World Bank - Development Research Group (DECRG)

Jaime Saavedra

GRADE; World Bank

Carolina Sánchez-Páramo

World Bank

Mauricio Santamaria

affiliation not provided to SSRN

Lucas Siga

New York University (NYU) - Abu Dhabi

Date Written: December 2005

Abstract

This paper selectively synthesizes much of the research on Latin American and Caribbean labor markets in recent years. Several themes emerge that are particularly relevant to ongoing policy dialogues. First, labor legislation matters, but markets may be less segmented than previously thought. The impetus to voluntary informality, which appears to be a substantial fraction of the sector, implies that the design of social safety nets and labor legislation needs to take a more integrated view of the labor market, taking into account the cost-benefit analysis workers and firms make about whether to interact with formal institutions. Second, the impact of labor market institutions on productivity growth has probably been underemphasized. Draconian firing restrictions increase litigation and uncertainty surrounding worker separations, reduce turnover and job creation, and poorly protect workers. But theory and anecdotal evidence also suggest that they, and other related state or union induced rigidities, may have an even greater disincentive effect on technological adoption, which accounts for half of economic growth. Finally, institutions can affect poverty and equity, although the effects seem generally small and channels are not always clear. Overall, the present constellation of labor regulations serves workers and firms poorly and both could benefit from substantial reform.

Suggested Citation

Arias, Omar and Blom, Andreas and Bosch Mossi, Mariano and Cunningham, Wendy and Fiszbein, Ariel and Lopez-Acevedo, Gladys and Maloney, William F. and Saavedra, Jaime and Sánchez-Páramo, Carolina and Santamaria, Mauricio and Siga, Lucas, Pending Issues in Protection, Productivity Growth, and Poverty Reduction (December 2005). World Bank Policy Research Working Paper No. 3799. Available at SSRN: https://ssrn.com/abstract=875446

Omar Arias (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Andreas Blom

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Mariano Bosch Mossi

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Wendy Cunningham

World Bank ( email )

1818 H St., NW
Washington, DC 20433
United States
202-473-2384 (Phone)
202-522-0050 (Fax)

Ariel Fiszbein

World Bank - Human Development Network ( email )

1818 H Street, NW
Washington, DC 20433
United States

Gladys Lopez-Acevedo

Lead Economist ( email )

1818 H Street
Washington, DC 20433
United States

HOME PAGE: http://www.worldbank.org/en/about/people/gladys-lopez-acevedo

William F. Maloney

World Bank - Poverty and Economic Management Unit ( email )

1818 H Street NW
Washington, DC 20433
United States
202-473-6340 (Phone)
202-522-0054 (Fax)

IZA Institute of Labor Economics

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

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Jaime Saavedra

GRADE ( email )

Av, Graú 915
Barranco, Lima
Peru

World Bank

1818 H Street, N.W.
Washington, DC 20433
United States

Carolina Sánchez-Páramo

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Mauricio Santamaria

affiliation not provided to SSRN

No Address Available

Lucas Siga

New York University (NYU) - Abu Dhabi ( email )

PO Box 129188
Abu Dhabi
United Arab Emirates

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