Open Access Journal Article

Labour Market Flexibility and Long-Run Growth in Developed Economies

by Raffaella Belloni a,* ,  W. Robert J. Alexander a  and  Sajid Anwar a
a
School of Business and Creative Industries, University of the Sunshine Coast, Queensland, Australia
*
Author to whom correspondence should be addressed.
EAL  2024 3(4):68; https://doi.org/10.58567/eal03040003
Received: 11 June 2024 / Accepted: 17 October 2024 / Published Online: 25 December 2024
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Abstract

We examine the relationship between labour market flexibility, as measured by employment protection legislation (EPL), and long-term economic growth in developed economies from 1995 to 2022. We consider conflicting viewpoints on whether rigid labour market regulations hinder or promote economic growth. Employing a cross-country regression model, controlling for factors including initial GDP per capita, capital formation, human capital, research and development, and indicators of macroeconomic performance, we find that only initial income level and capital formation significantly influence long-run growth in real per capita GDP. EPL has no significant impact in the long run, challenging the pre-2000 advocacy of labour market deregulation by major international organisations. We conclude that policy should focus on supporting the investment decisions of the private sector without distorting market mechanisms.

Keywords: Economic Growth; Labour Market Flexibility; Employment Protection Legislation; Developed Economies;
Copyright: © 2024 by Belloni, Alexander and Anwar. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.

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ACS Style
Belloni, R.; Alexander, W. R. J.; Anwar, S. Labour Market Flexibility and Long-Run Growth in Developed Economies. Economic Analysis Letters, 2024, 3, 68. https://doi.org/10.58567/eal03040003
AMA Style
Belloni R, Alexander W R J, Anwar S. Labour Market Flexibility and Long-Run Growth in Developed Economies. Economic Analysis Letters; 2024, 3(4):68. https://doi.org/10.58567/eal03040003
Chicago/Turabian Style
Belloni, Raffaella; Alexander, W. R. J.; Anwar, Sajid 2024. "Labour Market Flexibility and Long-Run Growth in Developed Economies" Economic Analysis Letters 3, no.4:68. https://doi.org/10.58567/eal03040003
APA style
Belloni, R., Alexander, W. R. J., & Anwar, S. (2024). Labour Market Flexibility and Long-Run Growth in Developed Economies. Economic Analysis Letters, 3(4), 68. https://doi.org/10.58567/eal03040003

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