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Do Labor Market Rigidities Have Microeconomic Effects? Evidence from Within the Firm
Lafontaine, Francine; Sivadasan, Jagadeesh
2009
Citation:Lafontaine, Francine, and Jagadeesh Sivadasan. 2009. "Do Labor Market Rigidities Have Microeconomic Effects? Evidence from within the Firm." American Economic Journal: Applied Economics, 1(2): 88–127. <http://hdl.handle.net/2027.42/83422>
Abstract: We exploit a unique outlet-level dataset from a multinational chain with over 2,500 outlets in 43 countries to investigate the effects of labor regulations that protect employment. The dataset contains information on output, materials, and labor costs at a weekly frequency over several years, allowing us to examine the consequences of labor market rigidity at a much more detailed level than has been possible to date. We find that higher labor market rigidity is associated with significantly higher levels of hysteresis. We also find some evidence that labor costs are less responsive to sales revenue in more highly regulated markets. (JEL: E24, J08, J23, K31, M51)
Description: An early version of this paper, titled "The Microeconomic Implications of Input Market Regulations: Cross-Country Evidence from Within the Firm" was published in February, 2007 as part of the IPC Working Paper Series (Number 22).
