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Labor market institutions and industrial performance: an evolutionary study

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  • Yılmaz Kılıçaslan
  • Erol Taymaz

Abstract

This study investigates the impact of labor market institutions on industrial performance from a Schumpeterian perspective. We suggest that labor market institutions play a very important role in the process of creative destruction, because they may create an environment that encourages and enforces innovation, and help to reallocate resources, most importantly labor, through swift elimination of weak performers. We specifically look at the effects of the quantity of labor market regulations and inter-industry wage differentials on labor productivity for a panel of 44 countries for the period 1965–1999. Our findings suggest that those countries that introduce more regulations on conditions of employment and wages achieve higher levels of productivity. Moreover, wage compression raises productivity by reallocating resources to productive activities.
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  • Yılmaz Kılıçaslan & Erol Taymaz, 2008. "Labor market institutions and industrial performance: an evolutionary study," Journal of Evolutionary Economics, Springer, vol. 18(3), pages 477-492, August.
    • Handle: RePEc:spr:joevec:v:18:y:2008:i:3:p:477-492
    DOI: 10.1007/s00191-008-0098-4
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    Cited by:

    1. Norhayati Yahaya & Mohamad Sattar Rasul & Ruhizan Mohamad Yasin, 2017. "The Marketability of National Dual Training System (NDTS) Graduates in the Industry," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 7(6), pages 592-611, June.
    2. Norhayati Yahaya & Mohamad Sattar Rasul & Ruhizan Mohamad Yasin, 2017. "The Attractiveness of National Dual Training System (NDTS) Graduates," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 7(6), pages 655-673, June.
    3. Carlo Gianelle, 2014. "Labor market intermediaries make the world smaller," Journal of Evolutionary Economics, Springer, vol. 24(5), pages 951-981, November.
    4. Barbosa, Natália & Faria, Ana Paula, 2011. "Innovation across Europe: How important are institutional differences?," Research Policy, Elsevier, vol. 40(9), pages 1157-1169.
    5. Yilmaz Kilicaslan & Ilhom Temurov, 2015. "New Lessons from an Old Strategy: Import Substitution, Productivity and Competitiveness," EconWorld Working Papers 15002, WERI-World Economic Research Institute, revised Dec 2015.

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    More about this item

    Keywords

    Labor market regulation; Flexibility; Industrial structure; Productivity; J8; J24; J31; O43; O47;
    All these keywords.

    JEL classification:

    • J8 - Labor and Demographic Economics - - Labor Standards
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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