Who demands labour (de)regulation in the developing world? Revisiting the insider–outsider theory*

Abstract

The “insider–outsider” perspective, which dominates the discourse on labour regulations, argues that protective regulations hurt the less well-off outsiders but are kept in place in the interests of the insiders, who are covered by the regulations. Thus, if the insider–outsider divide were as depicted in the standard representation, outsiders would be strongly against regulations. Our evidence that a large majority of outsiders in developing countries in fact support protective labour regulations calls for a rethink of the sharp insider–outsider divide. We suggest a number of avenues for exploration, including income-sharing, transitions, fairness and employer power in labour markets.