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

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Author Info
Kamila Fialová
Ondřej Schneider

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Abstract

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

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Article provided by M.E. Sharpe, Inc. in its journal Eastern European Economics.

Volume (Year): 47 (2009)
Issue (Month): 3 (May)
Pages: 57-83
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Handle: RePEc:mes:eaeuec:v:47:y:2009:i:3:p:57-83

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  3. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR, CES, MSH, vol. 15(30), pages 47-104, 04. [Downloadable!] (restricted)
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  4. Griffith, Rachel & Harrison, Rupert & Macartney, Gareth, 2006. "Product Market Reforms, Labour Market Institutions and Unemployment," CEPR Discussion Papers 5599, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. John P Martin, 1998. "What Works Among Active Labour Market Policies: Evidence from OECD Countries' Experiences," RBA Annual Conference Volume, in: Guy Debelle & Jeff Borland (ed.), Unemployment and the Australian Labour Market Reserve Bank of Australia. [Downloadable!]
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  6. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March. [Downloadable!] (restricted)
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  7. Saint-Paul, Gilles, 1996. "Understanding Labour Market Institutions: A Political Economy Perspective," CEPR Discussion Papers 1438, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  11. Rebitzer, James B. & Taylor, Lowell J., 1995. "The consequences of minimum wage laws Some new theoretical ideas," Journal of Public Economics, Elsevier, vol. 56(2), pages 245-255, February. [Downloadable!] (restricted)
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  12. Nicola Brandt & Jean-Marc Burniaux & Romain Duval, 2005. "Assessing the OECD Jobs Strategy: Past Developments and Reforms," OECD Economics Department Working Papers 429, OECD, Economics Department. [Downloadable!]
  13. Stephen Nickell & Luca Nunziata & Wolfgang Ochel, 2005. "Unemployment in the OECD Since the 1960s. What Do We Know?," Economic Journal, Royal Economic Society, vol. 115(500), pages 1-27, 01. [Downloadable!] (restricted)
  14. Manning, Alan, 1995. "How Do We Know That Real Wages Are Too High?," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1111-25, November. [Downloadable!] (restricted)
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