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Labor Market Dynamics, Informality and Regulations in Latin America
Author:
Mr. Antonio David
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,
Samuel Pienknaguranull

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Mr. Jorge Roldos
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Series:
IMF Working Papers
Volume/Issue:
Volume 2020: Issue 019
Language:
English
Publication Date:
31 Jan 2020
DOI:
https://doi.org/10.5089/9781513523750.001
ISBN:
9781513523750
ISSN:
1018-5941
Pages:
27
Keywords:
WP; labor market; labor market regulation; regulation; employment protection regulation; labor market outcome; labor market flexibility; log employment; labor market dynamism; labor market adjustment; labor market slack; destruction margin; labor market data; employment benefit; long-run employment-GDP relationship; Labor market regulations; Unemployment; Labor markets; Employment; Minimum wages; Central America; South America; Global; Labor Market Adjustments; Informality; Latin America
Legal-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.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2020: Issue 019