Labor market regulations in the context of structural transformation

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ADB Economics Working Paper Series ; No. 543

Classification and Topics

• Classification: Wirtschaft ; Wages, Compensation, and Labor Costs: Public Policy ; Informal Labor Markets ; Microeconomic Analyses of Economic Development ; Formal and Informal Sectors; Shadow Economy; Institutional Arrangements ; Comparative Studies of Countries
• Subject: dismissal regulations ; informal employment ; minimum wage ; severance payments ; structural transformation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ranjan, Priya ; Hasan, Rana ; Eleazar, Erik Jan
• Event: Veröffentlichung
• (who): Asian Development Bank (ADB)
• (where): Manila
• (when): 2018

Further information

• DOI: doi:10.22617/WPS189312-2
• Handle: http://hdl.handle.net/10419/203383
• Last update: 10.03.2025, 11:41 AM CET