Poverty and Labour Market Institutions in Europe

Abstract

The aim of this paper is to analyse the effects of flexibility in the labour market on workers’ monetary poverty in 15 European countries in the time span 2005–2016. We estimate how the labour market regulation index (LMRI) affects workers’ monetary poverty through two empirical exercises: in the first one, we use an autoregressive distributed lag model and, in the second one, the generalized method of moments model. The results suggest that greater flexibility of the labour market is positively correlated with greater monetary poverty among employed people. The result does not change significantly when introducing the effect of the economic crisis and the interaction effect between the economic crisis and the LMRI. Therefore, we conclude that the outcome should be considered to be noticeable whatever the macroeconomic conditions occurring in the labour market.
Key words: Labour market, Flexibility, Poverty, Dynamic panel data.
JEL: C20, I30, J50.