Labor regulation and unemployment : the case of Tunisia

Abstract

Using a different database of labor regulation, we sketch the relationship between labor market flexibility and unemployment in Tunisia during the period 2000-2013. The results of the study find no link between labor regulation and unemployment. The main finding from the dynamic panel estimation is that the labor regulation composite indicator used does not have a statistically significant association with the unemployment rate for the selected 115 developing countries. However, there is a direct link between the firing and hiring regulation and unemployment. In addition, the interactive variable between these indicators and the dummy variable for Tunisia doesn’t seem to explain why unemployment is higher in Tunisia than in other countries. Regulation has no adverse effect on aggregate unemployment.