Role Of Labor Market Institutions Research Articles

Labor Market Institutions and Employment

The role of labor market institutions and policies has received great attention throughout the history of labor economics. Labor market institutions are responsible for a wide range of policies, regulations, and organizations that affect the labor market, though their impact on employment can vary depending on the specific institutions and the economic context across countries. This entry attempts to provide an overview of five main labor market institutions and policies, i.e., the minimum wage, employment protection, the power of unions, active labor market policies, and unemployment insurance/unemployment benefits. It also presents theoretical expectations of their effects on employment outcomes and collates relevant results from the related literature, focusing mainly on the most recent empirical evidence. Finally, this entry provides insights regarding labor market institutions and offers proposals for shaping the labor market landscape.

Explaining the rise of populism in European democracies 1980–2018: The role of labor market institutions and inequality

AbstractObjectivesThis article aims to find country‐level factors that explain the rise of populist parties in European democracies. While populism is often connected to inequality, we not that right‐wing populist parties tend to thrive on fear, including fear of job loss. If flexible labor markets mean that unemployment is dedramatized because finding a new job is easier, labor market flexibility could dampen populism and inequality may be less important.MethodsWe run country‐level fixed effects regressions on populist party vote shares in 26 European countries from 1980 to 2018. We use two different classifications of right‐wing and left‐wing populist parties and control for employment protection strictness as measured by OECD, Gini coefficients of disposable income, and a large set of control variables.ResultsUnemployment is positively associated with left‐wing populism. Strict employment protection is positively associated with right‐wing populism. Gini inequality of income is unrelated to (both types of) populism.ConclusionStrong employment protection and low‐income inequality may not be the most efficient way to combat right‐wing populism. A strategy that promotes flexible labor markets, and job upgrading may be an alternative. More research on the link between labor market institutions and (in particular, right‐wing) populism is needed.

Occupational Regulation, Institutions, and Migrants’ Labor Market Outcomes

We study how licensing, certification and unionisation affect the wages of natives and migrants and their representation among licensed, certified, and unionized workers. We provide evidence of a dual role of labor market institutions, which both screen workers based on unobservable characteristics and also provide them with wage setting power. Labor market institutions confer significant wage premia to native workers (4.0, 1.6, and 2.7 log points for licensing, certification, and unionization), due to screening and wage setting power. Wage premia are significantly larger for licensed and certified migrants (10.3 and 6.6 log points), reflecting a more intense screening of migrant than native workers. The representation of migrants among licensed (but not certified or unionized) workers is 15% lower than that of natives. This again implies a more intense screening of migrants by licensing institutions than by certification and unionization.

Changes in Secondary Healthcare Use Over Retirement Transition: Examining Social Differences With Swedish Register Data.

BackgroundDespite its relevance for healthcare expenditures and public health, few studies have examined how secondary healthcare use changes during the retirement transition. We therefore use Swedish register data to examine whether retirement is associated with intensified secondary healthcare use overall and for specific subgroups based on gender and education.MethodsThe sample was all individuals registered in Sweden who retired from paid work in 2010. We used Generalised Estimating Equations models to analyse changes in two indicators of secondary healthcare use, namely specialist visits and hospitalisation, from 3 years prior to 5 years after retirement.ResultsRetirement is not associated with changes in specialist visits or hospitalisation per se. Three years before retirement, women were more likely to visit a specialist but less likely to be hospitalised than men; these gender differences disappeared approximately 1 year before retirement. Women with high education were more likely to visit a specialist than women with low education across the entire retirement transition, particularly post-retirement. Significant differences with regard to specialist visits between male educational groups only emerged 12 months after retirement. There were no educational differences with regard to hospitalisation.ConclusionsWe conclude that secondary healthcare use in Sweden does not generally change with retirement. However, over the course of retirement gender differences in secondary healthcare use tend to decrease and within-gender educational differences tend to increase. We interpret the results as reflecting the role of labour market institutions in contributing to gender differences but repressing educational differences in secondary healthcare use.

The Automation of Occupations in Europe:The Role of Labour Market Institutions and Human Capital

The Automation of Occupations in Europe:The Role of Labour Market Institutions and Human Capital

The role of labor market institutions in the impact of immigration on wages and employment*

AbstractWe collect 1,030 previously estimated wage effects and 432 employment effects of immigration, and we document that the mean and median effects on the relative wage are negative and significantly different from the small positive mean and median effects on the average wage. The pattern is reversed for employment effects where the magnitudes are also smaller. Combining the effect sizes with measures of labor market institutions, we find that institutions might shield native workers from relative wage consequences but reduce the average wage effect of immigration. We do not detect a significant and robust association for the employment effects.

Productivity Convergence in the European Union – The Role of Labour Market Institutions

Productivity Convergence in the European Union – The Role of Labour Market Institutions

Dynamic version of Okun’s law in the EU15 countries—The role of delays in the unemployment‐output nexus

AbstractThis paper estimates Okun's law in the EU15 countries between 1980 and 2018. It employs different versions with a focus on the dynamic part of the short‐run relationship. We find that the negative relationship between unemployment and output generally holds over time. However, Okun's coefficient varies substantially across countries. The dynamic version can shed light on different country estimates found in the literature. The paper argues that lag effects need to be considered to avoid possible misspecification. A mixed‐lag structure indirectly controls for potential missing explanatory variables such as the role of labour market institutions.

The Role of Labor Market Institutions in the Impact of Immigration on Wages and Employment

We study the role of institutions in affecting the labor market impacts of immigration using a cross-country meta-analysis approach. To accomplish this, we gather information on 1,030 previously estimated wage effects and 432 employment effects of immigration from 61 academic studies covering 18 developed countries. The mean and median impact on the relative wage of directly exposed native workers are negative and significantly different from the small positive mean and median impact on the average wage level. This pattern is reversed for employment effects where the magnitudes are smaller. We combine this database with country-level data on labor market institutions from the OECD. The results suggest that institutions may shield native workers from distributional (relative) wage consequences of immigration but exacerbate the impacts on average wages in the economy. We do not detect a significant and robust association for the employment effects of foreign workers.

Sticky Swedes and flexible Finns: manufacturing labour markets in Finland and Sweden during the Great Depression

ABSTRACTNominal wage stickiness is a popular explanation for the greatness of the Great Depression. According to the sticky-wage explanation, the slow adjustment of nominal wages raised real wages above the market-clearing level, causing a reduction of output and labour, thus increasing unemployment. Explanations for nominal wage stickiness are usually sought within the labour-market institutions and their changes after the First World War. This paper examines the role of labour-market institutions by comparing manufacturing labour markets in Finland and Sweden. These two countries had quite similar economic structures, trade patterns, and exchange rate policies, but different systems of industrial relations. Results indicate that stronger trade unions and collective bargaining made nominal wages stickier in Sweden, while in Finland, where collective agreements did not exist, unions were weaker, and wage adjustment was more flexible. As a result, real product wages rose in Sweden but fell in Finland. This created in Sweden stronger pressure for reducing labour input than in Finland. Our results show on one hand that labour market institutions clearly influenced the course of the Great Depression, but on the other hand that they alone do not explain the different economic outcomes during the depression and the recovery.

The institutional and cultural framing of the educational stratification in fertility. A review of the role of labor market institutions and attitudinal orientations

The aim of this article is to overcome the incomplete explanation of previous research findings on the societal determinants of the educational fertility differentials in Europe. Our analysis draws on two overlooked factors, the role of labour market setting and the diffusion of new values. Combining ESS, EVS and WVS data for 2004–2009 with contextual indicators on labour market setting and cultural orientations, our multilevel analysis shows that labour market conditions in terms of share of part time jobs, dimension of public sector employment and strictness of EPL do not systematically modify the gradient of fertility by parities. But instead, we observe a clear moderator effect of attitudinal orientations. Results show that in societies where postmodernism is widespread, both high and low educated women are less likely to have children. A high diffusion of gender egalitarianism is associated with a reduction of the gradient through an increase of the likelihood of having a child especially for higher educated women. This article concludes by highlighting some responses to societal polarization of fertility related to both structural and cultural factors and indicates avenues for future research on the social stratification of fertility.

Marriage and Divorce: The Role of Labor Market Institutions

Marriage and Divorce: The Role of Labor Market Institutions

Wage Compression within the Firm: Evidence from an Indexation Scheme

Abstract We revisit the role of labour market institutions by showing how they affect the sharing of firm-specific rents between employers and employees. We look at an Italian wage indexation mechanism (‘Scala Mobile’) that compressed the distribution of wages, imposing real wage increases at the bottom of the distribution. After developing a simplified version of a search model with intra-firm bargaining and on-the-job search, we document that skilled workers received lower wage adjustments when employed at firms with many unskilled workers and they tended to move towards more skill-intensive firms. Moreover, the system drove the least skill-intensive firms out of the market.

Offshoring under uncertainty

We develop a theoretical framework explaining firms’ offshoring decisions in the presence of uncertainty. Our model highlights the role of labor market institutions in shaping a firm’s ability to effectively react to future shocks, yielding a sharp prediction on the prevalence of offshoring in a given industry: The propensity of firms to source intermediate inputs from foreign rather than domestic suppliers decreases in the foreign country’s labor market rigidity, and this effect is particularly pronounced in industries with higher volatility. Combining industry-level data on the U.S. offshoring intensity with measures of labor market rigidity and industry volatility, we find empirical evidence strongly supportive of the model’s predictions.

When Don’t Developing Countries Benefit from Capital Account Liberalization? The Role of Labor Market Institutions

Many developing countries do not seem to benefit from capital account liberalizations. We find that labor market frictions can be an important reason for this and develop a model to explain the relationship between unemployment and capital account openness. In our model, a developing country with a flexible labor market tends to attract more capital inflow after capital account liberalization and hence, employment and output go up. On the other hand, when a developing country has a rigid labor market, opening the capital account leads to greater capital outflow and both employment and output fall. Such a pattern becomes less obvious in advanced economies. Using cross-country data from 1980 to 2004, we provide empirical evidence to support the theoretical predictions. When calibrating our model to Peru, which has a rigid labor market and opened its capital account in the 1990s, we find that 40% of the increase in the unemployment rate in Peru in that period is due to the capital account liberalization. One policy insight from our analysis is that for developing countries labor market reforms and capital account liberalization are complements.

Shaping labour migration to Italy: the role of labour market institutions

This article critically examines the existing explanations for the initiation and perpetuation of labour migration to Italy between the 1970s and early 2000s and highlights the role of labour market institutions in shaping demand for migrant labour. It posits that the institutions governing the labour market in Italy have contributed to creating demand for migrant workers first by generating a significant amount of low-standard employment and second by producing massive obstacles and disincentives to the labour market participation of the domestic supply of labour.

Labor market institutions, the insider/outsider divide and social inequalities in employment in affluent countries

Abstract This article investigates the role of labor market institutions for social inequalities in employment. To distinguish institutional impacts for men and women, age groups and educational levels the analysis draws on data from 21 countries using the European Union Labor Force Survey and the Current Population Survey 1992–2012. The analysis demonstrates that there is significant heterogeneity in the relationship between institutions and employment across social groups. In line with the literature on dualization, institutions that arguably protect labor market insiders, i.e. employment protection, unionization and unemployment benefits, are frequently associated with greater inequality between typically disadvantaged groups and their insider peers. By contrast, institutions that discriminate less between insiders and outsiders, i.e. active labor market policies, minimum income benefits and centralized wage bargaining at times boost social equality on the labor market. The insider/outsider argument provides a valuable heuristic for assessing heterogeneity in institutional impacts, yet in several instances the results deviate from the expectations.

Wage bargaining, trade and growth

We construct a North-South product-cycle model of trade with fully-endogenous growth and union wage bargaining. Economic growth is driven by Northern entrepreneurs who conduct R&D to innovate higher quality products. Northern production technologies can leak to the South upon successful imitation. The North has two sectors: a tradable industrial goods sector (manufacturing) where wages are determined via a bargaining process and a non-tradable sector (services) where wages are flexible. The South has only a tradable industrial goods sector where wages are flexible.We find that unilateral Northern trade liberalization, in the form of lower Northern tariffs on industrial goods, increases the rate of innovation but decreases both the bargained wage in the industrial sector and the flexible wage in the service sector. The wage effects are relative to the Southern wage rate. We also consider a variant of the model with Northern unemployment, driven by a binding minimum wage in the non-tradable service sector. In this case, Northern tariff cuts decrease the innovation rate and the bargained wage rate. In addition, the Northern unemployment rate increases. The model thus highlights the role of labor market institutions in determining the growth and labor market effects of tariff reductions. We also study the effects of unilateral Southern trade liberalization.

Countercyclical Labor Productivity: The Spanish Anomaly

The cyclical pattern of labor productivity has been a subject of discussion in the economic literature for long time with important theoretical implications.Many authors point out the role of labor market institutions as determinants of the cyclical pattern. For these authors, the loss of procyclicality experimented in the United States since the mid-1980s could be explained by a decrease of rigidities in labor market. Following the literature, this paper explores the role of labor regulation by analyzing the case of Spain, which has gone in a few years from a strongly procyclical pattern to a countercyclical one. Our results suggest that the high rigidity in wages and the great flexibility in labor, related to the temporary workers after the 1984 legislative reform, is the main cause of the countercyclical pattern of the Spanish labor productivity. Our findings are in line with previous papers highlighting the crucial influence of labor market institutions over the cyclical pattern.

The gender division of labor and second births: Labor market institutions and fertility in Japan

1. IntroductionVery low fertility rates in Southern Europe, Eastern Europe, and East Asia have been a source of great interest for demographers in recent years (Kohler, Billari, and Ortega 2002; Lesthaeghe 2010). Among the theories proposed to explain the emergence of what is termed 'lowest-low' fertility (total fertility rates of 1.3 or lower), theories emphasizing the unevenness of gender-role change have increasingly occupied center stage. Central among these is McDonald's gender equity framework, with its focus on the slow pace of change in men's and women's household roles compared to their increasingly equal participation in the public sphere, especially the labor market (McDonald 2000). Recent work has suggested that increases in gender equality are likely to help societies currently experiencing low fertility to move towards an equilibrium characterized by near-replacement fertility rates (Esping-Andersen and Billari 2015; Goldscheider, Bernhardt, and Lappegard 2015).This paper seeks to make both a theoretical and an empirical contribution to the analysis of how gender equality is related to fertility. First, we bring the role of labor market institutions into the analysis, theorizing the importance of considering how employment norms and work culture affect men's ability to participate in housework. In doing so we establish the connection not only between women's roles in the public and private spheres but also between men's roles in these two spheres. Second, we bring East Asia more fully into the literature on low fertility, which has been dominated by research on Europe. We utilize individual-level panel data from Japan, one of the countries that has had persistently low fertility over the past two decades, despite government policy efforts to raise the birth rate. We employ an analysis strategy that models husband's contribution to household labor in the context of Japanese labor market institutions and then models the effect of husband's household work on the transition to second birth. In demonstrating how gender-role specialization in Japanese marriages is connected to the broader labor market context, we argue that Japanese labor market structure and workplace norms have a negative impact on Japan's fertility rate.2. The household division of labor and fertility2.1 Empirical studiesFollowing McDonald's gender equity perspective and the expectation that a highly gendered household division of labor in postindustrial societies is likely to depress fertility, in recent years a number of empirical studies have endeavored to test this relationship. At the macro level, Feyrer, Sacerdote, and Stern (2008) find a positive relationship in OECD countries between the average household work share of husbands and the average number of births.3 A number of studies using micro-level data find that increased involvement of fathers in childcare and housework increases the likelihood of a second birth. For instance, Olah (2003) compares Sweden, which has had a longstanding dual-earner/dual-carer family model, with Hungary, a country that has emphasized paid work for men and women but a more traditional division of labor at home. She finds that fathers' involvement in household work increases the probability of second birth in both countries.4 Using US data, Torr and Short (2004) find a Ushaped relationship between couples' distribution of household labor and the transition to second birth, with a higher probability of second birth for couples where the wife does most of the housework (the 'traditional' model) as well as for couples where housework is shared relatively equally between spouses.Studies using micro-level data from countries with a more traditional malebreadwinner model have produced somewhat mixed results. In her comparative study of Italy and Spain, Cooke (2009) finds that fathers' share of childcare has no effect on the probability of a second birth in Spain. In Italy, fathers' childcare time has a positive effect but the strength of the effect varies by mothers' employment status. …