Globalisation, economic uncertainty and labour market regulations: Implications for the COVID‐19 crisis

Abstract

This paper empirically analyses the effects of globalisation on labour market regulations. We also interact globalisation measures with economic uncertainty, and they serve as potential determinants of de jure labour market conditions. For this purpose, we consider new innovative globalisation and economic uncertainty indices (the Revisited KOF Globalisation and the World Uncertainty) in a panel dataset of 136 countries from 2000 to 2017. The findings indicate that globalisation promotes labour market flexibility, while economic uncertainty decreases it. We also find that the interaction of globalisation with economic uncertainty positively affects labour market flexibility. The findings are robust to various sensitivity analyses, that is, different estimation procedures and globalisation indicators, including various controls and excluding outliers.