In What Circumstances Does Labor Market Liberalization Work?

This paper follows up on previous research which, using a difference-in-difference approach, suggested the absence of average effects of liberalization reforms (of both employment protection and unemployment insurance).  In this paper we investigate the circumstances in which liberalization may work through both regression analysis and fs/QCA methods.  Our sample covers labor market reforms between 1980 and 2008 in 14 European countries.  There are about as many cases of reforms leading to a significant improvement in labor market conditions as to significant deterioration.  Inferences about effects depend on assumptions about the time lag between the enactment of a reform and the impact on outcomes.  A configurational analysis of the most successful and unsuccessful reforms suggests that effects are highly contingent on time periods and that institutional and other country-specific variables have little explanatory power.