Effects Of Labor Market Institutions Research Articles

Labour Market Institutions and Their Effect on Labour Market Performance in the New EU Member Countries

This article focuses on the role of labour market institutions in explaining different labour market developments in European countries, with a special attention to the European Union member countries. This may allow us to analyse effects of various institutional setups and of their changes on major labour market indicators. We aim at complementing several studies from the late 1990's by using more recent data that allow us to compare institutional setups from the mid 1990's and early 2000's both in old and new EU member states. We estimate effects of labour market institutions on various performance indicators (unemployment, long-term unemployment, employment, activity rate). Our results confirm that high taxes increase unemployment, while active labour market policies tend to reduce it. We also show that stricter employment protection, higher taxes and larger economic burden represented by the minimum wage decrease employment and activity rate. Moreover, statistical tests indicate that there is a difference in the institutional effects between old and new EU members.

Wage persistence and labour market institutions: an analysis of young European workers

This article investigates the effects of Labour Market Institutions (LMIs) on wage persistence among young European workers at the beginning of their careers. We use European Community Household Panel (ECHP) data from 1995 to 2001 for 13 EU countries and estimate a three-level random intercept probit model that allows for unobserved heterogeneity both at the individual and country level. Overall, we find that LMIs explain wage persistence. In particular, we find a high level of Employment Protection Legislation (EPL) and a high level of Bargaining Centralization (BC) increase wage persistence.

Labour Market Institutions and the Employment Intensity of Output Growth. An International Comparison

This paper deals with the effects of labour market institutions on labour market performance. We analyse as an indicator for the labour intensity of output growth the employment threshold (the minimum growth rate of output necessary to keep employment constant). We show for a sample of 17 OECD countries for the period 1971 to 2002 that the strictness of employment protection raises the employment threshold in all econometric specifications. A higher wage bargaining coordination and a higher tax wedge reduce also the labour intensity of production, although the effects are not significant in all econometric specifications.

National Labor Market Institutions and the EU Integration Process

Giuseppe Bertola (Universita di Torino and EUI) February 14, 2004 This paper outlines theoretical insights regarding the motivation and effects of labor market institutions, and reviews empirical studies of relevant evidence from European and other countries’ historical experience. Institutional interference with

Inflation and Openness with Non-Atomistic Wage-Setters

This paper analyses the impact of trade openness on inflation in a strategic framework characterized by monopolistic production in the domestic sector and unionized labour markets. By stressing the interplay between internal and external sources of economic distortion, we show that the economy's inflationary bias reduces up to a critical level of trade openness. Beyond this threshold, wage setters may be induced to behave more aggressively in open economies, leading to higher equilibrium inflation. Based on a regression analysis that investigates the combined effect of labour market institutions and openness on inflation across nineteen OECD economies, we show that inflation is negatively related to openness when wage bargaining is decentralized, while there is virtually no link between openness and inflation at higher levels of wage centralization.

Disentangling the wage-productivity relationship: Evidence from select OECD member countries

Conventional theory proposes that firms reward productivity improvements with higher wages. Conversely, efficiency wage theory suggests that wages can induce greater productivity. This paper applies a statistical technique that disentangles the potential bidirectional feedback between wages and productivity. Wage strategies in six industrialized countries with various labor market institutions are examined. Conventional and efficiency wage practices vary systematically across the industrialized countries; these variations are consistent with the expected effects of labor market institutions.

Labour market institutions and the cyclical dynamics of employment

We present an empirical analysis of the effects of labour market institutions on the employment dynamics over the cycle. In the first part of the paper, a theoretical framework is provided with particular emphasis on working time regulations. The conclusions of the theory are tested in the second part on a sample of 20 OECD countries observed over the period 1975–1997. The empirical analysis is focused on expansions, contractions and different expansion segments. The claims of the theory are confirmed and a measure of the influence of labour market institutions on the employment responsiveness to the business cycle is provided through simulations.

Inflation and Openness with Non‐Atomistic Wage Setters

This paper analyses the impact of trade openness on inflation in a strategic framework characterised by monopolistic production in the domestic sector and unionised labour markets. By stressing the interplay between internal and external sources of economic distortion, we show that the economy’s inflationary bias reduces up to a critical level of trade openness. Beyond this threshold, wage setters may be induced to behave more aggressively in open economies, leading to higher equilibrium inflation. Based on a regression analysis that investigates the combined effect of labour market institutions and openness on inflation across nineteen OECD economies, we show that inflation is negatively related to openness when wage bargaining is decentralised, while there is virtually no link between openness and inflation at higher levels of wage centralisation.

Macroeconomic Policy Interaction under EMU: A Dynamic Game Approach

In this article, we study macroeconomic stabilization in the Economic and Monetary Union (EMU) using a dynamic game approach. With the aid of a stylized macroeconomic model, this article analyzes the transmission and interaction of national fiscal policies and monetary policy of the European Central Bank (ECB) in the EMU. A special focus is on the effects of labor market institutions in the participating countries and of the introduction of fiscal stringency criteria like those imposed in the Stability and Growth Pact.

Entrepreneurship in a Unionised Economy

This paper shows that labor market institutions are important for the formation of new enterprises. The effects of labor market institutions on entrepreneurship, wage determination, and firm size are analysed analytically and illustrated numerically. The main result is that an increase in union power reduces the equilibrium rate of entrepreneurship and reduces the average size of enterprises.

Diverging Male Wage Inequality in the United States and Ganada, 1981–1988: Do Institutions Explain the Difference?

The U.S. and Canadian economies have much in common, including similar collective bargaining structures. During the period 1981–88, however, although both countries witnessed a decline in the percentage of workers belonging to unions and an increase in hourly wage inequality, those changes were much more pronounced in the United States than in Canada. Using data on men in Canada and the United States in 1981 and 1988 (from the Labour Force Survey and supplements to the Current Population Survey), the authors study the effect of labor market institutions on changes in wage inequality by computing simple counterfactuals such as the distribution of wages that would prevail if all workers were paid according to the observed nonunion wage schedule. Their results suggest that much more severe declines in the unionization rate in the United States than in Canada account for two-thirds of the differential growth in wage inequality between the two countries.

Diverging Male Wage Inequality in the United States and Canada, 1981-1988: Do Institutions Explain the Difference?

The U.S. and Canadian economies have much in common,including similar collective bargaining structures. During the period 1981-88, however, although both countries witnessed a decline in the percentage of workers belonging to unions and an increase in hourly wage inequality, those changes were much more pronounced in the United States than in Canada. Using micro data on men in the United States and Canada in 1981 and 1988, the authors study the effect of labor market institutions on changes in wage inequality by computing simple counterfactuals such as the distribution of wages that would prevail if all workers were paid according to the observed nonunion wage schedule. Their results suggest that changes in unionization rates and minimum wages account for two-thirds of the differential growth in wage inequality between the two countries.

Corporatism and the European Labour Market after 1992

AbstractThis paper addresses the question of the effect of labour market institutions on economic performance. It reviews evidence to show that the performances of highly centralized, or ‘corporatist’ economies, such as Sweden and Austria, have in the past been superior to those of the current EC members. It considers the implications of this for European labour markets given the process of European integration. It seems likely that Europe as a whole will gravitate to a weak form of corporatism which may be associated with poor economic performance. Therefore we contrast the prospects of a neo‐liberal deregulatory with a more corporatist strategy as the optimum response for the Europe Community of the 1990s.