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.