Who Demands Labor (De) Regulation in the Developing World? Insider-Outsider Theory Revisited

LUCAS RONCONI; RAVI KANBUR; SANTIAGO LOPEZ CARIBONI

Conferencia; 2019 WIDER Development conference; 2019

UNU-WIDER

The creation of productive jobs is an essential precondition for achieving the SDGs on decent work and gender equality. A fundamental policy question is whether labor regulations promote or hinder productive job creation, particularly for women and disadvantaged groups. According to the insider-outsider theory, protective employment regulations negatively affect the wellbeing of outsiders. This paper attempts to contribute to the debate by revisiting the insider-outsider model. We present novel empirical evidence from developing countries showing that, contrary to the predictions of the model, outsiders support protective employment regulations. This evidence holds across countries in different regions, across different type of protective labor regulations (i.e., severance payment, minimum wages, working time), and for different categories of outsiders (i.e., unemployed workers and employees without access to legally mandated labor benefits). We revise the economic and political assumptions of the insider-outsider model discussing their empirical relevance in a developing country context