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The impact of labor market deregulation on productivity: a panel data analysis of 19 OECD countries (1960-2004)

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  • Robert Vergeer
  • Alfred Kleinknecht
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    Abstract

    Mainstream economists argue that unemployment can be reduced by deregulation of labor markets, that is, by easier firing, reduction of minimum wages and social benefits, and so forth. Our panel data analysis shows that wage-cost saving flexibilization of labor markets has a negative impact on labor productivity growth. A one percentage point change in growth rates of real wages leads to a change in labor productivity growth by 0.31-0.39 percentage points. This cannot solely be explained by hiring low-productive labor. Flexibilization of labor markets leads to a labor-intensive growth path that is problematic with an aging population in Europe.

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    Bibliographic Info

    Article provided by M.E. Sharpe, Inc. in its journal Journal of Post Keynesian Economics.

    Volume (Year): 33 (2010)
    Issue (Month): 2 (January)
    Pages: 371-408

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    Handle: RePEc:mes:postke:v:33:y:2010:i:2:p:371-408

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    Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=109348

    Related research

    Keywords: employment growth; flexible labor; labor market deregulation; labor productivity growth; wage policy;

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    Cited by:
    1. Palokangas, Tapio K., 2014. "The Political Economy of Labor Market Regulation with R&D," IZA Discussion Papers 8147, Institute for the Study of Labor (IZA).

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