Insider-outsider Model Research Articles

Precarious work, sickness absence and risk sharing between employers, employees and social insurance

Abstract Background The COVID-19 pandemic has revealed the importance of social protection systems including income security when health problems arise. Particularly the protection of those with precarious work felt short in some countries. For some time there has been an interest in the European variation in sick-pay schemes but still we still lack knowledge on country differences and similarities. This is particularly the case regarding precarious workers, while they have higher chances for sickness absence. Our aim is to understand, in the context of precarious work, the differences in risk sharing of sickness absence between employer, worker and social insurance. Methods Data had been collected in a study on sickness absence follow-up regimes in nine countries (the Nordic countries (Sweden, Denmark, Finland, Norway and Iceland) and in Germany, the Netherlands, Belgium and the UK). Comparative statistics were collected and scholars familiar with their countries system were invited to answer a list of 51 questions on system characteristics. Data were re-analysed from the perspective of precarious work, using actor-network theory and insider-outsider theory of employment. Results Countries with shorter employer periods of sick pay have stricter follow-up responsibility for employers as they are regarded gatekeeper except for The Netherlands. The tax-based systems that target all citizens offer more protection for precarious workers while the employee-focused systems define their target population more strictly, leaving precarious workers underserved. There is a large difference in how self-employed are supported or not. Conclusions Despite small economic differences in the nine countries studied, the systems for dealing with sickness absence in the context of precarious work vary largely. Even though, in all systems those with secure jobs seem insiders and those with precarious work outsiders. Social protection systems should be updated to avoid an increasing inequality. Speakers/Panellists Anita Tisch Working time and Organization, Federal Institute for Occupational Safety and Health, Dortmund, Germany Angelique De Rijk Department of Social Medicine, Maastricht University, Maastricht, Netherlands

Employment Protection Legislation and Labour Market Outcomes: A Unit Level Analysis of the Indian Manufacturing Sector

Abstract Building on insights from the insider-outsider theory, we examine the effects of the Employment Protection Legislation (EPL) on labour market outcomes, using high-court verdicts on labour disputes invoking Chapter 5-A and 5-B of the Industrial Disputes Act. Our regression analysis of a statewise unit-level dataset suggests that pro-worker judicial verdicts lead to an increase in wages and labour productivity especially in labour intensive industries, but discourage employment. The study demonstrates how the insider-outsider model combined with the labour market segmentation theory, unlike labour adjustment models, explain such findings consistently. The results suggest that loosening the EPL regime will have implications on the balance between the quantity and the quality of jobs, with serious consequences on industrial performance.

The effects of unions on job flows

PurposeThe purpose of this paper is to focus on the role of unions for job flow rates.Design/methodology/approachThe author uses a longitudinal data set emphasizing the importance of the time dimension.FindingsUsing the fixed effects estimator, the author finds that unions decrease the job separation rate and the job finding rate.Originality/valueThe findings support that the implications of the insider-outsider model by Lindbeck and Snower (1986): unions are beneficial for insiders but harm outsiders.

Labour union strategy and non-regular worker unionisation: an institutionally adjusted insider–outsider model for Japan

Japan’s unionisation rates and share of regular employees in the workforce have been in continuous decline since the 1970s. We use an insider–outsider model adjusted to Japanese employment institutions to link subjective short-term choice sets of unions with long-term institutional change. Non-regular work sets the entry conditions into the labour market, and by representing regular workers exclusively, unions protect wages and security for their members during economic downturns, without increasing involuntary unemployment at the national level. This strategy is linked to the observed expansion and diversification of non-regular work in Japan, particularly in involuntary non-regular employees who were originally seeking regular work. A rise in the non-regular worker base further reduces unionisation rates and union bargaining power, suggesting that the long-term exclusion of non-regular workers is unsustainable. We present a case study of UA Zensen, the major union federation leading non-regular worker unionisation at national level, to examine how union federations can overcome enterprise level barriers to expansion. Despite UA Zensen’s success, significant challenges to inclusive unionisation still exist, particularly in the manufacturing sector. Despite changes in union federations’ official stance in the late 1990s, the data show that non-regular workers continue to be excluded at enterprise level.

‘A guided walk in the woods’: boundary crossing in a collaborative action research project

This article discusses the ideal and practice of collaboration in a collaborative action research project in which university researchers work together with staff from the field of primary education. A qualitative case study was conducted using the theory of boundary crossing to make sense of the ways collaboration took place within the project team. The main theme, also a major dilemma in the project, referred to the transition from a democratic towards a more directive approach within the project design after the first year. The members of the project team took shifting and ambivalent positions within the project as they were trying to cross boundaries between the different goals of the project. Also, boundary objects on different levels contributed to the collaboration. We conclude that clear boundaries between groups or a strong shared identity, as proposed by an insider–outsider model of action research and the notion of first-order democracy, are not helpful in complex collaborative action research projects. Instead, we need the development of second-order democracy means in order to cross boundaries and sustain a critical dialogue about differences.

Insiders and Outsiders: Does Forbidding Sexual Harassment Exacerbate Gender Inequality?

Sexual harassment is perceived to be a major impediment to female labor force participation. Using novel data on all workplace sexual harassment precedent in US Circuit Courts from 1982-2002, we exploit the random assignment of US appellate judges and the fact that a judge’s gender and party of appointment predict decisions in sexual harassment cases to demonstrate the causal impact of pro-plaintiff sexual harassment precedent on the adoption of sexual harassment human resources policies and reduction in gender inequality. Consistent with an insider-outsider model of involuntary unemployment, forbidding sexual harassment encouraged entry of outsiders and reduced gender inequality along the dimensions of quantity and price, particularly in the construction industry, which was heavily affected by sexual harassment litigation, but these ameliorative effects are reduced for insider women. Pro-plaintiff decisions spurred the adoption of sexual harassment human resources policies by 4.8 percentage points and increased female employment shares by 0.4 percentage points.

The Insider-Outsider Model Reexamined

In this note we introduce different levels of decay in the Goyal, Galeotti and Kamphorst (GGK) insider-outsider model of network formation. First, we deal with situations where the amount of decay is sufficiently low to avoid superfluous connections in strict Nash networks and we examine the architectures of strict Nash networks. We show that centrality and small diameter are robust features of strict Nash networks. Then, we study the Nash and efficient networks when the decay vanishes.

Insiders and Outsiders: Does Forbidding Sexual Harassment Exacerbate Gender Inequality?

Sexual harassment is perceived to be a major impediment to female labor force participation. Using novel data on all workplace sexual harassment precedent in US Circuit Courts from 1982-2002, we exploit the random assignment of US appellate judges and the fact that a judge’s gender and party of appointment predict decisions in sexual harassment cases to demonstrate the causal impact of pro-plaintiff sexual harassment precedent on the adoption of sexual harassment human resources policies and reduction in gender inequality. Consistent with an insider-outsider model of involuntary unemployment, forbidding sexual harassment encouraged entry of outsiders and reduced gender inequality along the dimensions of quantity and price, particularly in the construction industry, which was heavily affected by sexual harassment litigation, but these ameliorative effects are reduced for insider women. Pro-plaintiff decisions spurred the adoption of sexual harassment human resources policies by 4.8 percentage points and increased female employment shares by 0.4 percentage points.

Market Power, Dismissal Threat and Rent Sharing: The Role of Insider and Outsider Forces in Wage Bargaining

One of the predictions of the insider-outsider theory is that wages will be higher in sectors (firms) with high labor adjustment costs/high turnover costs. This prediction is tested empirically in this study, using an insider-outsider model and a longitudinal panel of large firms in Portugal. The results revealed that firms where insider workers appear to have more market power tend to pay higher wages. In particular, we found that the threat of dismissal acts to weaken insiders' bargaining power and, consequently, to restrain their wage claims. Moreover, the results also showed that real wages in Portugal are downward rigid.

Permanent and temporary workers. The insider-outsider model applied to the Spanish labour market

In this paper we study the capacity of the insider-outsider model to analyse the working of the Spanish labour market. Our paper shows that this theoretical model is a useful instrument to explain the segmentation in the Spanish labour market between permanent and temporary workers.

An Internal Labour Market Approach to Assessing the Gains from Outsourcing

AbstractThis paper considers an aspect of the assessment of net gains from outsourcing, which has received, it is argued, inadequate attention in the analytical and empirical literature: This aspect is the analysis of team productivity, the essential element for the existence of ‘the firm’ in economic theory. The simple model presented here derives from the labour market literature of internal labour markets and insider-outsider models. The net gains from outsourcing within this framework are assessed by comparing the cost saving from production synergies within the administrated internal labour market, with cost savings from exploiting relative wage differentials in the external labour market. This analysis seeks to identify the determinants of the magnitude of these cost savings and provide a framework to allow their assessment to contribute as one facet of the ‘make or buy’ decision.

The Effect of Employee Stock Ownership on Wage and Employment Bargaining

When workers can bargain over wages and employment, standard insider-outsider models predict underemployment if the number of insiders is small and overemployment if the number of insiders is large. For instance, a union will restrict employment growth in an expanding firm and oppose layoffs in a contracting firm. This paper shows that employee stock ownership can solve both problems and that the necessary ownership share is often relatively small. The results are compared with related results in the literatures on profit-sharing and labor-managed firms.

The insider–outsider model and Japanese labor unions

The insider–outsider model has been used to explain the persistence of shocks to unemployment in Japan. This model of Japanese union behavior is tested using both firm-level and aggregate-level data. The evidence does not provide support for the insider–outsider model, and thus this mechanism for persistence. However, the evidence does show that Japanese unions have a stronger preference for employment stability than U.S. unions.

A new theory of corporatism and wage setting

The standard view on corporatist institutions for wage setting in many European economies is based of the insider-outsider model. Corporatism is associated with lack of wage flexibility. This paper discusses a new approach starting from the importance of nominal contracts. The rationale for these contracts is to avoid future bargaining. Adjusting these contracts ex post to aggregate shocks would raise their efficiency. However, avoiding the bargaining required for this adjustment was the main reason for negotiating these contracts in the first place. This is the fundamental contradiction. Under corporatism, outside institutions can play this role. These institutions provide therefore a type of flexibility not available in decentralized economies. Empirical evidence supports the basic ideas of this model.

On the credibility of harassment in the insider—outsider model

In a well-known version of the insider-outsider model, the decision by outsiders not to underbid follows from the threats made by insiders to harass new entrants, thereby raising the entrants' disutility of work. It has been argued, however, that the harassment threat is not credible, at least in the one-period case. In the current paper we explore this claim, concluding that the existence of a social convention, together with associated social pressure effects, provides a possible explanation of the credibility of the harassment threat. Moreover, we suggest that such a convention is likely to play a role even in a multi-period analysis.

Insider-outsider forces in wage and employment determination: The case of Sweden

This paper applies a statistical approach used by Andersen & Hylleberg (1993) in their study of insider-outsider effects in wage-employment determination in the Danish manufacturing sector, to analyse insider-outsider effects in the Swedish private sector. Focusing on the univariate and multivariate trend properties of the data, a bivariate wage-employment error correction model is used as an explicit test-bed for the theoretical predictions of adjustments to anticipated and unanticipated shocks. According to the Blanchard & Summers (1986) insider-outsider model, the former changes are absorbed entirely by wages while the latter changes are reflected fully in employment. As in the case of analysis on Danish manufacturing data, it is found that the evidence based on data related to the Swedish private sector also fails to accept the Blanchard & Summers insider-outsider model in its unqualified version. Nonetheless several important traits of insider-outsider mechanisms seem to be in accordance with the observed evolution of the data.

INSIDERS AND OUTSIDERS IN UNION MODELS

Abstract. This paper examines the importance of distinguishing between ‘insiders’and ‘outsiders’in models of union-firm bargaining. In general, insiders are those workers already established in the firm, while outsiders are either unemployed or working in temporary, low-security jobs. Modifying traditional union models to take account of this distinction is straightforward in one-period models, where the union is assumed to be indifferent to the welfare of outsiders, but is much more complicated in dynamic models. Some of the predictions of insider-outsider models concerning wage rigidity and unemployment are not robust. However, the prediction that wages will depend on both insider and outsider forces is robust and appears to be supported by the empirical evidence. Furthermore, evidence from the U.S. suggests that insider power should not be viewed as a purely union phenomenon.

A Test of the Insider-Outsider Hypothesis in Union Preferences

In this paper a model of wage and employment determination in a unionized industry is developed and estimated. The model incorporates rules governing union membership so that an insider-outsider model can be estimated. This approach allows the trade-off the union makes between wages and employment to vary depending on whether membership is growing or contracting. The model is estimated using data on the International Woodworkers of America and the wood products industry in British Columbia, Canada. The insider-outsider model is consistently rejected in favor of models in which some positive weight is placed on all levels of employment. The results do suggest however that the weight the union places on employment decreases with the level of employment. Copyright 1995 by The London School of Economics and Political Science.

DEVELOPMENTS IN LABOUR MARKET THEORY and THEIR IMPLICATIONS FOR MACROECONOMIC POLICY

This paper reviews a number of labor market theories that have been developed over the past twenty-five years with the aim of explaining the behavior of unemployment in that period. It reviews union models, efficiency wage models, and insider-outsider models. It argues that none of these theories have been successful in providing a persuasive explanation of the rise in unemployment across the OECD and that the main contribution of labor market theory has been to show that intuitions that seemed to be important insights into the workings of the labor market turn out to have much more modest contributions when formalized. Copyright 1995 by Scottish Economic Society.

Trade unions and seniority employment rules

Some, but not all, trade union and insider-outsider models assume that a seniority employment rule is used. We investigate when firm and union members gain from such a rule and the consequences of their adopting one. Generally, providing a seniority wage scale is also used, they gain if union membership is not too large relative to demand and union bargaining power not too great. Moreover, when outsiders are hired under a seniority employment rule, employment is at the competitive level. These results might explain why bargaining over employment is relatively uncommon and typically occurs only in industries with declining employment.