Are corporatist labour markets different? Labour market regimes and unemployment in OECD countries

Abstract

Abstract.Empirical studies on the unemployment effects of labour market institutions show contradictory results. One explanation is that these institutions affect unemployment differently depending on the regime in which they operate. Because of good labour relations, institutional complementarities and a trade‐off between external and internal flexibility, they produce distinctive effects in corporatist regimes. Based on empirical evidence from 20 OECD countries over the period 1985–2008, the author finds that, in corporatist labour markets, strict employment protection legislation reduces unemployment, and unemployment benefits have no negative effect. He also shows that high real interest rates, low capital accumulation and restrictive fiscal policy during recessions increase unemployment.