Why don’t improvements in the business environment and deregulation of labour markets always result in the reduction of the unemployment rate? This question is addressed by looking at the relation between the level of regulatory burden for doing business and the labour market, and the unemployment rates in the six Western Balkan countries and territories— Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Montenegro, and Serbia. The sole dependent variable is the level of unemployment, which is examined in relation to the selected World Bank “Doing Business” indicators in the form of overall distance to frontier and labour market regulation pertaining to dismissing workers and tax wedge. The score for the WB6 countries is contrasted with the score of six “frontrunners” (those that are at the frontier) and six “backbenchers” (those that are farthest from the frontier). There is an apparent divergence among these three groups in both the level of unemployment and regulatory burden.
Background Paper: The Prospect of Job Creation in the WB6 Economies
1 August, 2015