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    Labor Market Regulations in the Context of Structural Transformation

    Ranjan, Priya; Hasan, Rana; Eleazar, Erik Jan | April 2018
    Abstract
    This paper constructs a theoretical model to study labor market regulations in developing countries within the context of structural transformation. When workers are risk averse and the market for insurance against labor income risk is missing, regulations that provide insurance to workers (such as severance payments) are efficiency enhancing and promote structural transformation. However, regulations that simply create barriers to the dismissal of workers not only impede structural transformation, they also end up reducing the welfare of workers. The implications of some other issues like general regulatory burden, weak state capacity, and minimum wage regulations are analyzed as well. The paper provides some empirical evidence broadly consistent with the theoretical results using cross-country data. While dismissal regulations increase the share of informal employment, severance payments to workers do not.
    Citation
    Ranjan, Priya; Hasan, Rana; Eleazar, Erik Jan. 2018. Labor Market Regulations in the Context of Structural Transformation. © Asian Development Bank. http://hdl.handle.net/11540/8297. License: CC BY 3.0 IGO.
    ISSN
    2313-6537 (print)
    2313-6545 (electronic)
    Keywords
    Economic Crisis
    Economic Efficiency
    Economic Policies
    Regional Economic Development
    Public Sector Wages
    Crisis
    Unemployment
    Economic cooperation
    Gross domestic product
    Employment
    Wage payment systems
    Wages
    Financial crisis
    Labor economics
    Regional economics
    Guaranteed annual wage
    Wage differentials
    Wages and labor productivity
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    Citable URI
    http://hdl.handle.net/11540/8297
    Metadata
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    ewp-543-labor-market-regulations.pdf (630.7Kb)
    Author
    Ranjan, Priya
    Hasan, Rana
    Eleazar, Erik Jan
    Theme
    Economics
    Public Sector
     
    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise
    Copyright 2016-2021 Asian Development Bank Institute, except as explicitly marked otherwise