Reforms of collective bargaining institutions in European Union countries: Bad timing, bad outcomes?

Abstract

This paper investigates whether flexibility-enhancing reforms of national collective bargaining systems have positive outcomes in terms of employment in the short term, especially when implemented during an economic downturn. The analysis consists in applying local projections to a novel panel database of reforms of collective bargaining institutions in EU countries in the period 2000–2018. There is no evidence that making collective bargaining institutions more flexible during a recession has a positive effect on employment in the short term. More specifically, reforms that decentralize bargaining closer to the firm-level have negative short-term effects, particularly on the employment of 15–54 year-olds and low-educated workers. They also tend to favor temporary employment in the medium term. The results do not support the idea that collective bargaining institutions should be reformed during a recession to boost employment.