Impact Of Labour Market Reforms Research Articles

The impact of labor market reforms on firm training for nonregular and regular workers

AbstractNonstandard employment is typically associated with reduced opportunities for workers to accumulate human capital via job training. One policy response is to require equal access to training for nonstandard employees. In this study, we investigate the impact of a 2007 Korean labor‐market reform that required such access for nonstandard employees. Using a difference‐in‐difference methodology, we find that, overall, the reform reduced the incidence of employer‐provided training for both regular and nonregular workers. At the employer level, the negative effect for regular workers attenuates over time, implying some type of adaptation or evasion by employers that preserves differential rates of training. Although the main effects on training were negative, we find considerable heterogeneity in outcomes. Specifically, the presence of a union is associated with a significantly greater probability of postreform training for nonregular workers, while the presence of performance‐pay systems is associated with a significantly lower probability for nonregular workers and a higher probability for regular workers. Ultimately, these results imply that the success of labor‐market reforms that seek to improve nonstandard job quality depends upon employer and labor‐market characteristics. Such reforms may be most successful in situations where unions can help assure compliance with legislative intent.

The distributional impact of labour market reforms: A model-based assessment

Abstract This paper studies the effects of labour market reforms on the functional distribution of income in a DSGE model (Roeger et al., 2008) with skill differentiation, in which households supply three types of labour: low-, medium- and high-skilled. The households receive income from labour, tangible capital, intangible capital, financial wealth, and transfers. We trace how structural reforms in the labour market affect these different types of income. The quantification of labour market reforms is based on changes in structural indicators that significantly reduce the gap of the EU average income towards the best-performing EU countries. We find a general trade-off between an increase in employment for a particular group and the income of the average group member relative to income per capita. Reforms, which aim at increasing employment of low- and medium-skilled workers, are associated with a fall in low- and medium-skilled wages relative to income per capita. Capital owners generally benefit from labour market reforms, with an increasing share of profits in total income that can be attributed to limited entry into the final goods production sector.

Trends in the association of different forms of precarious employment and self-rated health in Germany. An analysis with the German Socio-Economic Panel between 1995 and 2015

BackgroundPrecarious employment has increased in Germany by means of labour market flexibilisation throughout the 1990s and 2000s. In this study, trends in the association of self-rated health (SRH) with different...

The Distributional Impact of Labour Market Reforms: A Model-Based Assessment

This paper studies the effects of labour market reforms on the functional distribution of income in a DSGE model (Roeger et al., 2008) with skill differentiation, in which households supply three types of labour: low-, medium- and high-skilled. The households receive income from labour, tangible capital, intangible capital, financial wealth and transfers. We trace how structural reforms in the labour market affect these different types of income. The quantification of labour market reforms is based on changes in structural indicators that significantly reduce the gap of the EU average income towards the best-performing EU countries. We find a general trade-off between an increase in employment for a particular group and the income of the average group member relative to income per capita. Reforms that increase employment of low- and medium-skilled workers imply a trade-off between employment and wages in the low- and medium-skilled group, due to the increase in the skill-specific supply of labour. Capital owners generally benefit from labour market reforms, with an increasing share in total income. This can be attributed to limited entry into the final goods production sector, underlining the importance of product market reforms in addition to labour market reforms.

The Effects of Labor and Product Market Reforms: The Role of Macroeconomic Conditions and Policies

The paper estimates the dynamic macroeconomic effects of labor and product market reforms on output, employment and productivity, and explores how these vary with prevailing macroeconomic conditions and policies. We apply a local projection method to a new dataset of major country- and country-sector-level reform shocks in various areas of labor market institutions and product market regulation covering 26 advanced economies over the past four decades. Product market reforms are found to raise productivity and output, but gains materialize only slowly. The impact of labor market reforms is primarily on employment, but it varies across types of reforms and depends on overall business cycle conditions—unlike that of product market reforms. Reductions in labor tax wedges and increases in public spending on active labor market policies have larger effects during periods of slack, in part because they usually entail some degree of fiscal stimulus. In contrast, reforms to employment protection arrangements and unemployment benefit systems have positive effects in good times, but can become contractionary in periods of slack. The economy’s response to such reforms is significantly improved when they are accompanied by fiscal or monetary stimulus.

Poland's Labour Market Adjustment in Times of Economic Slowdown WDN3 Survey Results

This paper presents the results of a survey carried out in Poland in 2014 among nearly 1500 firms, within the framework of the ECB’s Wage Dynamics Network (WDN). It aims at assessing the impact of the global economic and financial crisis on firms’ business activity, as well as analysing the way the labour market adjusted to the slowdown and the role institutional reforms played at that time. According to our analysis, the absence of real recession, together with a rapid response of wages at the beginning of the slowdown translated into a relatively mild reduction of employment and a moderate unemployment increase. The shocks in 2009 and 2012 were comparable in terms of their scale. In both cases a drop in demand gradually spilled over to lower customers’ ability to pay and to higher uncertainty. However, the shocks hit completely different parts of the economy. While the first shock was observed mainly in export-driven enterprises (industry), the second one was observed mostly in domestic market oriented companies (construction). Moreover, firms in Poland did not experience any additional, major credit constraints during the global financial crisis. The results confirm a relatively high real and nominal wage flexibility and a limited impact of labour market reforms in the period 2009-2013.

Impact of labour market reforms on economic activity in European Union: short term costs and long term benefits

The main objective of this paper was to quantify the long- and short-term impacts of labour market reforms on economic activity in EU countries, including Croatia. Therefore, we derived a model using the pooled mean group estimator (PMG) for the period from 2000 to 2011. Before performing dynamic panel analysis based on the PMG estimator, the unit root and panel cointegration tests were performed. According to the results, labour market reforms have positive and statistically significant long-term impact on GDP per capita. On the other hand, labour market reforms also have a statistically significant and negative effect on GDP per capita in the short-run. Control variables (industrial production and the rate of the active population) also have significant impacts on GDP per capita. In addition to econometric analysis, we also present an overview of empirical and theoretical research on labour market reforms in developed, developing and transition countries.

Labor Market Reforms and Current Account Imbalances - Beggar-Thy-Neighbor Policies in a Currency Union?

Member countries of the European Monetary Union (EMU) initiated wide-ranging labor market reforms in the last decade. This process is ongoing as countries that are faced with serious labor market imbalances perceive reforms as the fastest way to restore competitiveness within a currency union. This fosters fears among observers about a beggarthy- neighbor policy that leaves non-reforming countries with a loss in competitiveness and an increase in foreign debt. Using a two-country, two-sector search and matching DSGE model, we analyze the impact of labor market reforms on the transmission of macroeconomic shocks in both, non-reforming and reforming countries. By analyzing the impact of reforms on foreign debt, we contribute to the debate on whether labor market reforms increase or reduce current account imbalances.

Labor Market Reforms and Current Account Imbalances: Beggar-Thy-Neighbor Policies in a Currency Union?

Member countries of the European Monetary Union (EMU) initiated wideranging labor market reforms in the last decade. This process is ongoing as countries that are faced with serious labor market imbalances perceive reforms as the fastest way to restore competitiveness within a currency union. This fosters fears among observers about a beggar-thy-neighbor policy that leaves non-reforming countries with a loss in competitiveness and an increase in foreign debt. Using a two-country, two-sector search and matching DSGE model, we analyze the impact of labor market reforms on the transmission of macroeconomic shocks in both, non-reforming and reforming countries. By analyzing the impact of reforms on foreign debt, we contribute to the debate on whether labor market reforms increase or reduce current account imbalances.

The Impact of Labour Market Reforms and Economic Performance on the Matching of the Short‐term and the Long‐term Unemployed

AbstractAs a reaction to high and persistent unemployment in Germany, the largest labour market reforms in post‐war history were implemented between 2003 and 2005. We analyse the impact of the reforms and its coincidence with an economic expansion on the efficiency of matching out of unemployment. Especially focussing on searcher heterogeneity, we estimate a system of stock‐flow matching functions for short‐term and long‐term unemployment (three‐stage least squares) on the basis of administrative data. In sum, the reforms increased matching efficiency for both groups, but the effect was larger for the long‐term unemployed. The interaction of reforms and economic expansion, however, was not influential.

INSTITUTIONS AND PERFORMANCE IN EUROPEAN LABOUR MARKETS: TAKING A FRESH LOOK AT EVIDENCE

Abstract This paper presents a selective survey of the recent literature on labour market institutions and offers new empirical EU‐based evidence on the impact of labour market reforms on employment and labour market adjustment. Although the literature traditionally treats labour market institutions as exogenous, attention shifted recently towards understanding the underlying causes of specific institutional arrangements. As a consequence, the literature highlights the great importance of an efficient policy design exploiting these interactions wisely and identifies general principles for achieving an efficient policy design at both macro and micro levels. Although empirical evidence does not show a major change in terms of intensity of labour market reform after the setting of the Economic and Monetary Union and the creation of the euro, the reforms aiming at strengthening the labour market attachment of vulnerable groups tend to have been successful both in raising their employment and increasing labour market adjustment.

Labor Market Flexibility and Inequality: The Changing Skill-Based Temporary Employment and Unemployment Risks in Europe

In this article we use comparative micro data for 15 European countries covering the period 1992-2007 to study the impact of labor market reforms on the skill-related individual risk of holding a temporary contract and the risk of being unemployed. Our results indicate no general increase in either of these skill gaps. Using two-step multilevel analyses, we show that in the case of high protection of regular contracts, lowering restrictions on the use of temporary contracts increases the relative temporary employment rates of low-skilled workers. However, this kind of partial deregulation, which has been implemented in the majority of Western European countries, has not translated into decreasing unemployment risks of the low-skilled vis-a-vis medium- and highly-skilled persons.

The Impact of Labor Market Reforms on Capital Flows, Wages and Unemployment

The paper contributes to the globalization debate by scrutinizing the international spillover effects which are provoked if a single country reduces the generosity of the unemployment compensation system or weakens labor union power. For this purpose a two-country model with imperfect competition in goods and labor markets and perfect competition in capital markets is developed. It is demonstrated that the comparative-static results depend on the degree of capital mobility, the degree of competition in the goods market and the institutional setup of the unemployment compensation system. Furthermore, it is shown that the impact of country-specific labor market reforms on households in other countries depends on whether the household’s main income source consists of wage income or capital income and profits.