The Review of Economics and Statistics Vol. 104 No. 6 2022
Employment Protection Deregulation and Labor Shares in Advanced Economies
Abstract
This paper assesses the impact of job protection deregulation on the labor share in a sample of 26 advanced economies during the 1970–2013 period, using a newly constructed dataset of major reforms in this area. We employ a difference-in-differences identification strategy using two identifying assumptions grounded in theory—deregulation has larger effects in industries characterized by (i) a higher “natural” propensity to regularly adjust the workforce and (ii) a lower elasticity of substitution between capital and labor. We find significant negative effects of deregulation on the labor share, contributing to about a tenth of its observed decline in advanced economies.
- DOI
- 10.1162/rest_a_00983
- Volume
- 104
- Issue
- 6
- Pages
- 1174-1190
- Language
- en
- Sources
- openalex crossref