Labour Market Institutions and Employment Performance

Abstract

The aim of the paper is to produce both a theoretical and empirical analysis on the existence and nature of a causal link between the set of labour market institutions (the industrial relations systems) and national employment performance.In Section 2, the existing literature is briefly discussed with particular attention to methodological and measurement difficulties. In Section 3, a simple model is presented for highlighting the possible existence of a complex causal link. The relationship between industrial relations systems and national employment performance is analysed in Section 4, using a comparative approach for 19 developed countries. In Section 5, we present a second empirical investigation using the principal components analysis methodology. The empirical results of Sections 4 and 5 confirm the existence of a complex relationship between labour market institutions and national employment performances. In particular, both empirical investigations support the idea of a double asymmetry: A good industrial relations system seems to be a necessary but not sufficient condition for a high(er) national employment performance while a bad industrial relations system appears to be a sufficient (but not necessary) condition for a low(er) employment performance.