The Regulation of Labor

Abstract

We investigate the regulation of labor markets through employment, collective relations, and social security laws in 85 countries. We find that the political power of the left is associated with more stringent labor regulations and more generous social security systems, and that socialist, French, and Scandinavian legal origin countries have sharply higher levels of labor regulation than do common law countries. However, the effects of legal origins are larger, and explain more of the variation in regulations, than those of politics. Heavier regulation of labor is associated with lower labor force participation and higher unemployment, especially of the young. These results are most naturally consistent with legal theories, according to which countries have pervasive regulatory styles inherited from the transplantation of legal systems.* Yale University, World Bank, Harvard University, Yale University, and Harvard University, respectively. This research was supported by the World Bank, the Gildor Foundation, the National Science Foundation, and the International Institute for Corporate Governance at Yale University. We appreciate helpful comments from Daron Acemoglu, Gary Becker, Olivier Blanchard, Simon Deakin, Richard Freeman, Edward Glaeser, Peter Gourevitch, Simon Johnson, Lawrence Katz, Casey Mulligan, Mark Roe, Christopher Woodruff, and anonymous referees. We also want to thank Patricio Amador, Jose Caballero, Benjamin Chen, Ronald Chen, Eugenio De Bellard, Gabriela Enrigue, Manuel Garcia-Huitron, Eidelman Gonzalez, Magdalena Lopez-Morton, Camila Madrinan, Christian Pfirrmann, Alejandro Ponce-Rodriguez, Kumar Rakhi, Damian Rozo, David Stewart, Franco Tapia and Deniz Yavuz, for excellent research assistance The complete data set and descriptions of all variables at the country level can be found at

Contract Enforcement: A Political Economy Model of Legal Development

“…the circumstances fostered relatively homogeneous populations with relatively 37. The empirical evidence (Botero et al 2004) seems to be consistent with the main results of the model. Legal quality (as negatively indicated by ''log number of days to start a business'') is lowest in Latin America and highest in the West (including Norway, Denmark, Sweden, Finland, Switzerland, Germany, Austria, Netherlands, France, Belgium, Italy, Spain, Greece, Portugal, US, UK, Canada, Australia, Ireland, Israel, New Zealand), whereas East Asia (including Japan, Korea, Hong Kong, Singapore, Taiwan) is in the middle.…”

“…Latin America, for example, seems to fit these stylized facts. Compared with North America, the culture in Latin America is more collective-oriented (Portes 1994;North et al 2000); the usage of informal contracts in Latin America is much higher, whereas the legal quality, the degree of institutionalized democracy during 1950-1995, the per capita GNP, and the average schooling level are much lower (De Soto 1989;Botero et al 2004); the income inequality in Latin America is almost the highest among all countries (United Nations 2005).…”

Institucionalização Partidária e Consistência Programática: A Resposta da Esquerda a Ataques Especulativos na América Latina

“…Por outro lado, investidores frequentemente reagem de forma negativa a governos de esquerda que, ao priorizarem justiça social em relação à eficiência econômica (Bobbio, 1994) e o emprego em relação ao controle da inflação, limitam a rentabilidade do investimento privado. Governos de esquerda tendem a proteger o mercado de trabalho (Botero et al, 2004) e a expandir o setor público no esforço de promover o em-prego. Eles também são considerados menos propensos ao conservadorismo fiscal e mais inclinados a distribuir renda (Bobbio, 1994).…”

Comparative Law and Finance: Past, Present and Future Research

“…For instance, there are now also datasets relating to the quality of government (LA PORTA, LOPEZ-DE-SILANES, AND SHLEIFER [1999]), regulations governing firm start-up (DJANKOV et al [2002]); contract enforcement (DJANKOV et al [2003]); securities regulation (LA PORTA, LOPEZ-DE-SILANES, AND SHLEIFER [2006]); labour regulation (BOTERO et al [2004]); private credit (overlapping with the earlier -creditor rights‖ index) (DJANKOV et al [2007]); and self-dealing rules (overlapping with the earlier -antidirector rights‖ index) (DJANKOV et al [2008]). …”

“…Thus, LLSV and others therefore often drew on indicators of stock market development as dependent variables. In some studies, however, other dependent variables were used such as the duration of court proceedings (DJANKOV et al [2002]) or the unemployment rate (BOTERO et al [2004]). …”