Labor market policies, informality and misallocation

Purpose The purpose of this paper is to understand labor market regulations and their consequences for the allocation of resources. Design/methodology/approach This paper constructs a theoretical model to study labor market regulations in developing countries and how it affects the allocation of resources between the less productive informal activities and more productive formal activities. It also provides empirical support for some theoretical results using cross-country data. Findings When workers are risk-averse and the market for insurance against labor income risk is missing, regulations that provide insurance to workers (such as severance payments) reduce misallocation. However, regulations that simply create barriers to the dismissal of workers increase misallocation and end up reducing the welfare of workers. This study also provides some empirical evidence broadly consistent with the theoretical results using cross-country data. While dismissal regulations increase the share of informal employment, severance payments to workers do not. Research limitations/implications The empirical exercise is constrained by the lack of availability of good data on the informal sector. Originality/value The analysis of the alternative labor market regulations analyzed in this paper in the presence of risk-averse workers is an original contribution to the literature.

Rights without remedy: the disconnection of labour across multiple scales and domains

This article examines the disconnection between promises of labour rights made at the international level and their inaccessibility to workers at the local level. Going beyond the concept of a global ‘governance gap’, it draws on a political economy perspective and focuses on the intersecting and competing roles of different forms of capital and the state, in curtailing workers’ paths to remedy in the global apparel (garment) value chain. A longitudinal case study of a campaign by Turkish garment workers, seeking remedy for lost earnings and severance payments due factory closure and wage theft, is the focus for analysis. The workplace is conceptualised as a key ‘arena of disarticulation’ in the apparel value chain, central in simultaneously embedding and dis-embedding commitments by brands, the state and employers, such that even wages for work done may be denied to workers with relative impunity. The article considers to what extent promises made in abstraction at the international level can hope to guarantee conditions at workplace level.

Employment protection legislation, labor courts, and effective firing costs

In many countries, labor courts play a central role in the determination of firing costs by monitoring and supervising the procedures for dismissals, and, eventually, deciding severance payments mandated by the employment protection legislation (EPL). To get some insights about the impact of labor courts on effective firing costs, we explore a new database that contains information on labor courts’ intervention in firings before and after the implementation of significant EPL reforms modifying severance payments and procedures for dismissals. Our results suggest that labor court rulings on economic dismissals did not fully translate the reduction of firing costs mandated by the new EPL to effective firing costs.

THE BANKRUPTCY OF FOREIGN CAPITAL COMPANIES AND INDONESIAN LABOR PROTECTION

Indonesia as a destination for investment will open an opportunity to foreign investor to come and invest their money in Indonesia. As the time goes by, those foreign companies cannot survive due to tight competition that may lead to bankruptcy. In Indonesia, Law No. 37 Year 2004 about bankruptcy and debt moratorium/suspension of payment has not been arranged it in detail about foreign stock company bankruptcy. Therefore, this research aims to examine 2 aspects, which are first, to show that foreign stock company in Indonesia can be bankrupted. Second, to explain the rights of Indonesian employees that works in that bankrupted company. From this research, we found that foreign stock company in Republic of Indonesia area can be bankrupted based on Act No. 25 Tahun 2007 about capital investment, which says that foreign capital investment must be in a form of Limited Liability Company based on the Indonesian law. This clearly states that foreign stock company in Indonesia should obey the law and order of Republic of Indonesia. Indonesian labor's rights for the labour who works for foreign stock company that experiences bankruptcy based on Labour Law No. 13 Year 2003 Act 165 states that the labor's rights include: severance payments, long service payment and com-pensation payment.

Corporate governance reporting: Compliance with upper limits for severance payments to members of executive boards in Germany

We examine how corporate governance reporting corresponds to actual conduct regarding severance payment caps for prematurely departing members of executive boards in Germany. Firstly, we evaluate the declarations of conformity for all companies listed in the CDAX between 2010 and 2014, which we use to determine conformity and deviation rates, and analyse the reasons for deviation, contributing to current research on comparative corporate governance, which focuses on when, why and how companies deviate from legitimate corporate governance goals (Aguilera, Judge, & Terjesen, 2018). Secondly, we assess the compensation amounts of all severance payments made and published by DAX companies to compare the respective severance ratio with the cap recommended by the German Corporate Governance Code (GCGC). We find that more than 20% of companies listed in the CDAX declared deviation in the declaration of conformity. Moreover, in 57% of actual severance cases where DAX companies had previously declared their conformity, the cap was exceeded. Yet, none of the companies that had exceeded the cap disclosed this in the following declaration of conformity. In most cases, the corporate reports deviated from reality and therefore could not serve as a suitable basis for decisions by the capital market.

Do Labor Market Regulations Affect the Link between Innovation and Employment? Evidence from Latin America

This paper sheds light on how labor market regulations affect the relationship between different types of innovation and employment in Latin America. We estimate the effect of process and product innovation on employment growth using Enterprise Surveys for 14 Latin American countries. We calculate the model for the whole sample and then classify countries according to the rigidness of their labor market regulations. We find that: (i) product innovations have a positive impact on employment growth; (ii) process innovations do not affect employment growth; and (iii) more rigid labor market regulations (minimum wages and severance payments) reduce the effects of innovation.