Taxation, Wage Bargaining and Unemployment

Abstract

Taxation, Wage Bargaining and Unemployment. By Isabela Mares. New York: Cambridge University Press, 2006. 288p. $70.00 cloth, $27.99 paper. Just three years after publishing The Politics of Social Risk: Business and Welfare State Development, a prize-winning book on the role of employers in the development of European welfare states, Isabela Mares offers an overarching explanation of labor market performance in postwar Europe. She builds on the institutionalist literature in political economy, but combines its best-known models of labor markets with other elements. As foundations, she takes the Calmfors-Driffil model, which stressed that unemployment varies with labor union centralization (since more centralized unions are better at delivering wage moderation), and the Soskice-Iversen model, which stressed that unemployment varies with the independence and policies of central banks (since union moderation is encouraged by nonaccommodating monetary policy, which adjusts to cancel out wage inflation that exceeds productivity growth). Mares notes, however, that in most cases, neither union centralization nor monetary policy institutions have varied as much as unemployment over time—leaving these models better able to account for cross-national variation than for cross-temporal patterns.