Discussion Paper 7

Notes on Labour Regulation – Its Measurement, Causes and Effects

Stan Siebert


Birmingham Business School (BHAM), Birmingham, UK



Labour regulation sets floors under wages and working conditions. This paper discusses measurement of such regulation, and its consequences for employment and productivity. Of particular interest will be the extent to which indicators of regulation can be adapted to analyse service sector (rather than whole economy) employment and productivity. For brevity, we will skirt the debate about the “legal origin” causes of regulation (on the one side, see Glaeser and Shleifer, 2002, on the other Deakin et al, 2007). While this debate is another approach to examining the efficiency of regulation, we will concentrate on direct analysis of regulation’s effects, again with emphasis on services. While labour regulation is by nature economy-wide, recent research (Bassanini et al 2008) has investigated whether employment protection has particular adverse effects in industries with high labour redundancy rates such as manufacturing. This research angle can potentially be applied to the service sector, as we will see.

The plan is as follows. In the next section we will set out the various dimensions of labour regulation, and measurement efforts. Then we will discuss its possible consequences. Here we will consider employment/unemployment consequences on which there is much research, and also productivity consequences which are conceptually more difficult to isolate (more employment can simply mean lower productivity, so it is necessary to analyse total factor productivity). Finally we will summarise ways forward for research on labour regulation effects on productivity in the services specifically.

Full text


Notes on Labour Regulation – Its Measurement, Causes and Effects

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Birmingham Business School
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This project is funded by the European Commission, Research Directorate General as part of the 7th Framework Programme, Theme 8: Socio-Economic Sciences and Humanities.

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