Labor Market Dynamics, Informality and Regulations in Latin America

By Antonio David, Samuel Pienknagura, Jorge Roldos

January 31, 2020

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Format: Chicago

Antonio David, Samuel Pienknagura, and Jorge Roldos. Labor Market Dynamics, Informality and Regulations in Latin America, (USA: International Monetary Fund, 2020) accessed December 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Labor markets in Latin America and the Caribbean (LAC) are characterized by high levels of informality and relatively rigid regulation. This paper shows that these two features are related and together make the speed of adjustment of employment to shocks slower, especially when regulations are tightly enforced. Evidence suggests that strict labor market regulations also have an adverse effect on medium-term growth. While both regulations on prices (minimum wages) and quantities (employment protection) decrease the speed of adjustment to shocks, they appear to be binding in different phases of the cycle—the former affects mostly the (net) job creation margin and the latter the (net) job destruction margin. The results also highlight possible interactions between labor market regulations and the effectiveness of macro-stabilization tools—including exchange rate depreciation.

Subject: Employment, Labor, Labor market regulations, Labor markets, Minimum wages, Unemployment

Keywords: Central America, Destruction margin, Employment, Employment benefit, Employment protection regulation, Global, Informality, Labor market, Labor market adjustment, Labor Market Adjustments, Labor market data, Labor market dynamism, Labor market flexibility, Labor market outcome, Labor market regulation, Labor market regulations, Labor market slack, Labor markets, Latin America, Log employment, Long-run employment-GDP relationship, Minimum wages, Regulation, South America, Unemployment, WP

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/019
Stock No:

WPIEA2020019
ISBN:

9781513523750
ISSN:

1018-5941

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