Product Market Regulation and Labor Market Performance around the World

Using annual data on 80 countries for 1980-2007 and a new indicator of product market regulation, this paper studies the effects of product market regulation on labor market performance among the total population as well as among two important groups of labor market outsiders: women and youth. It finds that stricter regulation is likely to both increase the unemployment rate and decrease the employment rate. The magnitude of the estimated effects is substantial. There are above-average effects on both groups of outsiders, with the effects being particularly strong on youth. The results are robust to variations in specification.