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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

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.

Suggested Citation

  • Robert Buchele & Jens Christiansen, 1999. "Employment and Productivity Growth in Europe and North America: The Impact of Labor Market Institutions," International Review of Applied Economics, Taylor & Francis Journals, vol. 13(3), pages 313-332.
    • Handle: RePEc:taf:irapec:v:13:y:1999:i:3:p:313-332
    DOI: 10.1080/026921799101571
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    References listed on IDEAS

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    1. Buchele, Robert & Christiansen, Jens, 1998. "Do Employment and Income Security Cause Unemployment? A Comparative Study of the US and the E-4," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 22(1), pages 117-136, January.
    2. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173, Decembrie.
    3. Kaufman, Roger T., 1988. "An international comparison of Okun's laws," Journal of Comparative Economics, Elsevier, vol. 12(2), pages 182-203, June.
    4. Edward P. Lazear, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(3), pages 699-726.
    5. Samuel Bentolila & Giuseppe Bertola, 1990. "Firing Costs and Labour Demand: How Bad is Eurosclerosis?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(3), pages 381-402.
    6. Annamaria Simonazzi & Paola Villa, 1999. "Flexibility and Growth," International Review of Applied Economics, Taylor & Francis Journals, vol. 13(3), pages 281-311.
    7. Gordon, Robert J, 1995. "Is There a Trade-off between Unemployment and Productivity Growth?," CEPR Discussion Papers 1159, C.E.P.R. Discussion Papers.
    8. Blondal, Sveinbjorn & Pearson, Mark, 1995. "Unemployment and Other Non-employment Benefits," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 11(1), pages 136-169, Spring.
    9. Paul R. 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.
    10. Richard B. Freeman, 1994. "Working Under Different Rules," NBER Books, National Bureau of Economic Research, Inc, number free94-1, March.
    11. William T. Dickens & Lawrence F. Katz, 1986. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
    12. Andrew Henley & Euclid Tsakalotos, 1993. "Corporatism And Economic Performance," Books, Edward Elgar Publishing, number 217.
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    Cited by:

    1. Heshmati Almas & Karlson Nils & Box Marcus, 2013. "Generality, State Neutrality and Unemployment in the OECD," Global Economy Journal, De Gruyter, vol. 13(3-4), pages 333-358, December.
    2. Sabien Dobbelaere & Mark Vancauteren, 2014. "Market imperfections, skills and total factor productivity : Firm-level evidence on Belgium and the Netherlands," Working Paper Research 267, National Bank of Belgium.

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