Preferences for Labor Regulation: Endowments vs. Beliefs

Abstract

Are preferences for labor regulations driven by individuals’ own endowments or their beliefs? To address this question, we conducted a cross-country survey on people’s opinions on employment protection legislation—an area where reform has proven to be difficult and personal interests are at stake. We find that individuals’ beliefs contribute two to three times more than their own endowments and personal pay-offs. A randomized information treatment confirms that beliefs can explain views about regulations, but beliefs can also change with new information. Our results are robust to several checks, including to alternative estimation techniques and samples.