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Labour market regulation, industrial relations and technological regimes: a tale of comparative advantage

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  • Andrea Bassanini
  • Ekkehard Ernst

Abstract

In this paper we present comparative evidence from OECD countries concerning the impact of labour market institutions and regulations on technological specialization. The interplay between the degree of labour market flexibility, the system of industrial relations and the knowledge base of different industries determines the viability of different human resource strategies, thereby shaping the patterns of comparative advantage. Our empirical results show that countries with coordinated industrial-relations systems and strict employment protection tend to specialize in industries with a cumulative knowledge base. We argue that two mechanisms explain these patterns. The larger the scope for resorting to internal labour markets, the lower the adjustment costs imposed by labour market regulation. Furthermore, employment protection and coordinated industrial-relations regimes, by aligning workers' and firms' bjectives, encourage firm-sponsored training as well as the accumulation of firm-specific competencies, allowing firms to fully exploit the potential of the internal labour market. Copyright 2002, Oxford University Press.

Suggested Citation

  • Andrea Bassanini & Ekkehard Ernst, 2002. "Labour market regulation, industrial relations and technological regimes: a tale of comparative advantage," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 11(3), pages 391-426, June.
    • Handle: RePEc:oup:indcch:v:11:y:2002:i:3:p:391-426
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    More about this item

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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