This paper assesses the impact of job protection deregulation on the labor share in a sample of 26 advanced economies during the 1970–2013 period, using a newly constructed dataset of major reforms in this area. We employ a difference-in-differences identification strategy using two identifying assumptions grounded in theory—deregulation has larger effects in industries characterized by (i) a higher “natural” propensity to regularly adjust the workforce and (ii) a lower elasticity of substitution between capital and labor. We find significant negative effects of deregulation on the labor share, contributing to about a tenth of its observed decline in advanced economies.

We present new evidence on the evolution of labor mobility in the United States over the past four decades. Building on the seminal methodology by Blanchard and Katz (1992), combined with multiple sources of regional population and migration data, we show that interstate mobility in response to relative labor demand conditions is not as high as previously established and has been weakening since the early 1990s. In addition, we find that mobility is countercyclical: net migration across regions responds more strongly to spatial disparities in recessions than in normal times. While the declining trend in mobility has been driven by weaker out-migration from states experiencing negative relative shocks, the mobility surge in recessions is mostly accounted for by temporarily stronger in-migration to better-performing states.