After the wave of independence of the 1940s and 1950s, developing countries followed protective development strategies (e.g., import-substitution industrialization), which were accompanied by related labour market and social policies. These development strategies and complementary labour market and social policies have come under attack since the 1980s. The so-called Washington Consensus (Williamson, 1990) pushed for the removal of protectionist strategies and social policies. Most developing countries have embarked on the path of reform, but the extent and direction of these reforms have varied from country to country. By building on the ‘institutional change’ framework, this paper examines legislation reforms in Tunisia and Lebanon that have taken place since the 1990s and aims to unfold the extent of flexibility brought by these reforms. While going through economic liberalization, Tunisia reformed its Labour Code in 1994/96. These labour legislation reforms later followed by the democratization that led to the adoption of the Social Contract on employment policy, labour relations and social policy in 2013. In the case of Lebanon, the democratic country which always followed a liberal model, the labour code was promulgated in 1946 and has been the subject of two attempts at reform (2001 and 2010) which have, up to now, failed to bring about the desired results. Concomitantly, the study aims to understand the institutional change through the role of ‘Social Pacts’ which represent specific forms of cooperation between representatives of government and organized interests (Advagic & al., 2005). In Lebanon, a so-called Social Pact was adopted after a national consulting process in 2010, and aims to reform the social protection and the employment policy. The goal is to understand the political and institutional factors that contributed to the reform of the individual labour relations (i.e fixed term contract, end of service benefits, etc.). Also, I aim to assess the influence of the regime type (authoritarian versus democracy) on reforms. The study is based on the comparable-cases method. The two countries display several historical and social similarities but differs in terms of outcomes. The paper relies on three sets of theories to explain institutional change: process (Mahonney & Thelen, 2010) and dynamics (Korpi, 2006) of change, and the role of external factors (Peck & Theodore, 2015). Those research questions are addressed by using a qualitative methodology and a process tracing research method to identify the causal mechanisms within each country cases and compare the reforms.