revised version published in: European Journal of Industrial Relations, 2005, 11 (1), 71-90
There is increasing pressure for the flexibility of labour markets both in current EU member
states and candidate countries. The paper aims to estimate the strictness of employment
protection regulation, one of the most relevant aspects of labour market flexibility, and the
degree of its actual enforcement, for the Baltic States. For the studies on CEE labour markets
the novelty in our approach is that we use information from the applicable legislation as well
as on the coverage of labour legislation and the practice of law enforcement. The analysis
shows that, though overall EPL strictness is close to the average of EU countries, individual
and collective dismissals are relatively heavily and temporary forms of employment relatively
weakly regulated. Still, the effective flexibility is increased by larger share of less protected
workers and problems with law enforcement, which may be the reason why employers’
estimates on the flexibility differ somewhat from the flexibility of formal legislation. The
employment protection legislation seems not to have influenced the level of unemployment in
the sample of CEE countries. However, it is possible that labour markets of Baltic States will
become more rigid if the law enforcement improves, with possible adverse effects on labour
market performance.
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