Luc Laeven, Peter McAdam, Alexander Popov, 10 December 2018

There are good arguments both in favour and against the idea that more labour market flexibility will deliver benefits to an economy during a downturn. This column presents novel evidence on this question, using data from Spain during the 2008–09 credit crunch. The results show that credit-constrained firms grow faster if they are subject to less strict firing and hiring restrictions, as long as they are technologically able to substitute labour for capital. The findings provide an argument in favour of more flexible labour laws.

Andrea Boltho, Wendy Carlin, Pasquale Scaramozzino, 13 June 2016

Since Italy’s monetary unification some 155 years ago, income per capita in the South (the Mezzogiorno) has fallen from virtually the same level as in the Centre-North to little more than 55% of the Centre-North’s level. This column asks why East Germany hasn’t suffered the same fate since German monetary unification 25 years ago.  East Germany is not like the Mezzogiorno because of labour market flexibility, different evolutions of the tradeable sector, and the weight of history.

Elisa Gamberoni, Erik von Uexkull, Sebastian Weber, 29 September 2010

How do trade and labour market institutions affect employment during a crisis? This column finds that trade openness leads to sharper drops in employment, but also faster recoveries. High severance pay dampens employment contraction and very high unemployment benefits are associated with a stronger contraction. These findings suggest that global employment is set to remain stagnant for 2010 before recovering in 2011.

Timothy Hatton, 09 September 2010

The recent recession that followed the global crisis has often been compared with the Great Depression. This column argues that an important but neglected lesson from that period is that policymakers should be firmly focused on fostering labour market flexibility and maintaining the employability of those out of work, rather than on short fixes that actually cause unemployment to persist.

Casper van Ewijk, Michiel van Leuvensteijn, 30 March 2010

How can Europe increase structural growth? This column argues that labour market flexibility is key. As a major barrier to labour movement is rigidity in the housing market, abolishing transfer taxes on residential property could result in gains of up to 0.4% of GDP.

Samuel Bentolila, 28 November 2008

Reviving the Spanish economy will require more that macroeconomic stimulus. This column says a sizeable reallocation of labour, brought about by increased labour market flexibility, is the only responsible course of action.

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