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Institutions and Economic Performance: Evidence from the Labour Market

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  • Eichengreen, Barry
  • Iversen, Torben

Abstract

We analyse the institutional determinants of economic performance, taking European labour-market institutions as a case in point. European economic growth after the Second World War was based on Fordist technologies, a setting to which the continent's institutions of solidaristic wage bargaining were ideally suited. They eased distributive conflicts and delivered wage moderation, which in turn supported high investment. The wage compression that was a corollary of their operation was of little consequence so long as the dominant technologies were such that firms could rely on a relatively homogeneous labour force. But as Fordism gave way to diversified quality production, which relied more on highly skilled workers, the centralization of bargaining and the compression of wages became impediments rather than aids to growth. Assuming that growth will rely even more in the future on rapidly changing, science-based, skilled-labour-intensive technologies, countries with centralized labour-market institutions will have to move still further in the direction of decentralization. Whether Europe in particular can accommodate these demands will help to determine whether it is able to re-establish a full employment economy in the twenty-first century. Copyright 1999 by Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Review of Economic Policy.

Volume (Year): 15 (1999)
Issue (Month): 4 (Winter)
Pages: 121-38

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Handle: RePEc:oup:oxford:v:15:y:1999:i:4:p:121-38

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Web page: http://oxrep.oupjournals.org/

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Cited by:
  1. Peter Mooslechner & Martin Schürz, 2001. "The Interaction of Wage Bargaining Institutions and an Independent Central Bank – A Methodological Reflection on Current Theories," Empirica, Springer, vol. 28(4), pages 487-506, December.
  2. Buscher, Herbert & Dreger, Christian & Ramos, Raul & Surinach, Jordi, 2005. "The Impact of Institutions on the Employment Performance in European Labour Markets," IZA Discussion Papers 1732, Institute for the Study of Labor (IZA).
  3. Lucio Baccaro & Marco Simoni, 2010. "Organizational determinants of wage moderation," LSE Research Online Documents on Economics 33510, London School of Economics and Political Science, LSE Library.
  4. Wolfgang Pollan, 2004. "Pattern Bargaining and Wage Leadership in Austria," WIFO Monatsberichte (monthly reports), WIFO, vol. 77(3), pages 197-211, March.
  5. 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, vol. 11(3), pages 391-426, June.
  6. Sumon Bhaumik & Ralitza Dimova & Subal C. Kumbhakar & Kai Sun, 2012. "Does Institutional Quality Affect Firm Performance? Insights from a Semi-Parametric Approach," William Davidson Institute Working Papers Series wp1029, William Davidson Institute at the University of Michigan.
  7. Gavin Cameron & Chris Wallace, 2002. "Macroeconomic Performance in the Bretton Woods Era, And After," Economics Series Working Papers 130, University of Oxford, Department of Economics.
  8. Doner, Richard, 2012. "Success as Trap? Crisis Response And Challenges To Economic Upgrading in Export-Oriented Southeast Asia," Working Papers 45, JICA Research Institute.
  9. Floro Ernesto Caroleo, 2000. "Le Politiche per l'Occupazione in Europa: una Tassonomia Istituzionale," CELPE Discussion Papers 52, CELPE - Centre of Labour Economics and Economic Policy, University of Salerno, Italy.
  10. Sauro Mocetti, 2004. "Social Protection and Human Capital: Test of a Hypothesis," Department of Economics University of Siena 425, Department of Economics, University of Siena.
  11. repec:wdi:papers:2011-1029 is not listed on IDEAS

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