Employment Protection Legislation in Emerging Economies: A Critical Literature Review

Employment Protection Legislation in Emerging Economies: A Critical Literature Review

Samir Amine, Wilner Predelus
Copyright: © 2018 |Pages: 19
DOI: 10.4018/978-1-5225-4134-9.ch002
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Abstract

With emerging economies facing significant lags in the use of information technology to improve their productivity and compete with industrialized economies, the availability of relatively lower-cost labor in the emerging economies is considered a powerful asset that can compensate for their technological disadvantage. However, regulating the labor market often proves to be rather challenging as it is important that a balance be struck between protecting workers and stimulating economic growth. This chapter analyzes the literature on labor market regulations in the emerging economies to observe that the trade-off between employment protection legislation (EPL), job creation, productivity, and innovation often cited in the literature is not conclusive.
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Epl And Employment

The recent debate over the relationship between EPL and employment has virtually been reduced to a discussion about the labor market flexibility. Theoretically, it is argued that EPL can be diligently designed to enhance the social protection of workers without distorting the labor market; while the contrarian view suggests that any intervention in the labor market can potentially lead to higher costs of hiring and firing, and consequently increase unemployment1. By analyzing the strength of the arguments, it is safe to conclude that the effects of EPL on employment is the most contentious topic relating to labor market policy, especially in emerging economies where the abundance of cheap labor is relied upon to fill the technology gap with their industrialized counterparts.

From an empirical perspective, the results vary from countries or regions within the same country and depending on the methodology used by the researcher.

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