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Employment and Productivity Growth in Europe and North America: The Impact of Labor Market Institutions

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  • Robert Buchele
  • Jens Christiansen
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    Abstract

    In this paper, we examine long-run employment and productivity growth in the major economies of North America and Europe from 1960 to the early 1990s. We develop a model in which output growth is determined by the growth of aggregate demand, and the relative contributions of employment and productivity growth to the growth of output depend on country specific labor market institutions. We find that institutions that promote collective bargaining, employment security and social protection have roughly equal and opposite effects on employment growth (negative) and productivity growth (positive), giving rise to an inverse relationship between these variables. The welfare implications of this finding are that labor market deregulation could result in more work and greater inequality and insecurity for workers, without significantly increasing the rate of economic growth.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/026921799101571
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal International Review of Applied Economics.

    Volume (Year): 13 (1999)
    Issue (Month): 3 ()
    Pages: 313-332

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    Handle: RePEc:taf:irapec:v:13:y:1999:i:3:p:313-332

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    Web page: http://www.tandfonline.com/CIRA20

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    References

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    1. Kaufman, Roger T., 1988. "An international comparison of Okun's laws," Journal of Comparative Economics, Elsevier, vol. 12(2), pages 182-203, June.
    2. Robert J. Gordon, 1998. "Is There a Tradeoff between Unemployment and Productivity Growth?," NBER Working Papers 5081, National Bureau of Economic Research, Inc.
    3. William T. Dickens & Lawrence F. Katz, 1987. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
    4. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
    5. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345.
    6. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
    7. Blondal, Sveinbjorn & Pearson, Mark, 1995. "Unemployment and Other Non-employment Benefits," Oxford Review of Economic Policy, Oxford University Press, vol. 11(1), pages 136-69, Spring.
    8. Paul Krugman, 1994. "Past and prospective causes of high unemployment," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Jan, pages 49-98.
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    Cited by:
    1. Karlson, Nils & Box, Marcus & Heshmati, Almas, 2008. "Generality, State Neutrality and Unemployment in the OECD," Ratio Working Papers 124, The Ratio Institute.

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