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Title:	Labor Market Regulations in the Context of Structural Transformation
Authors:	ADB; Priya Ranjan, Rana Hasan, Erik Jan Eleazar
Issue Date:	Apr-2018
Description:	Labor market regulations that provide insurance to workers are efficiency enhancing and raise the fraction of workers employed in the more productive formal sector. Determining what types of labor market regulations are optimal is challenging. Governments in developing countries attempt to regulate labor markets through wages, hours of work, hiring and firing restrictions, and work conditions. This paper constructs a theoretical model to study labor market regulations 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 are enhancing and raise the fraction of workers employed in the more productive formal sector. However, regulations that create barriers to the dismissal of workers may impede the transition to formal sector employment and reduce workers‘ welfare. Empirically, the paper finds that dismissal regulations increase the share of informal employment; however, severance payments to workers do not.
URI:	https://www.adb.org/publications/labor-market-regulations-structural-transformation https://elibrary.tucl.edu.np/handle/123456789/5443
ISBN:	N/A N/A
ISSN:	2313-6537 2313-6545
Country:	China People's Republic of
Appears in Collections:	ADB Collections

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