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Flexible Labour, Firm Performance and the Dutch Job Creation Miracle

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Author Info

  • Alfred Kleinknecht
  • Remco Oostendorp
  • Menno Pradhan
  • C. W. M. Naastepad

Abstract

Unlike internal ('functional') forms of flexibility of labour, external ('numerical') forms of flexibility (i.e. high shares of people on temporary contract or a high turnover of personnel) yield substantial savings on a firm's wage bill. Savings on wage bills lead to higher job growth, but do not translate into higher sales growth. Externally flexible labour appears to be related to lower labour productivity growth, the effects being different for innovating vs non-innovating firms. We discuss these findings from firm-level and worker-level data against the background of the Dutch job creation miracle during the 1980s and 1990s. Modest wage increases and flexibilization of labour markets may indeed create lots of jobs. However, this is likely to happen at the expense of labour productivity growth, raising serious doubts about the long-run sustainability of a low-productivity-high-employment growth path.

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Bibliographic Info

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

Volume (Year): 20 (2006)
Issue (Month): 2 ()
Pages: 171-187

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Handle: RePEc:taf:irapec:v:20:y:2006:i:2:p:171-187

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

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Related research

Keywords: Flexible labour; determinants of labour productivity growth; wage costs; firm growth and employment;

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Cited by:
  1. Addessi, William & Saltari, Enrico & Tilli, Riccardo, 2014. "R&D, innovation activity, and the use of external numerical flexibility," Economic Modelling, Elsevier, vol. 36(C), pages 612-621.
  2. Alex Bryson, 2013. "Do temporary agency workers affect workplace performance?," Journal of Productivity Analysis, Springer, vol. 39(2), pages 131-138, April.
  3. Sebastian Nielen & Alexander Schiersch, 2011. "Temporary Agency Work and Firm Competitiveness: Evidence from German Manufacturing Firms," Discussion Papers of DIW Berlin 1135, DIW Berlin, German Institute for Economic Research.
  4. Marco Di Cintio & Emanuele Grassi, 2013. "Uncertainty, flexible labour relations and R&D expenditure," EERI Research Paper Series EERI RP 2013/13, Economics and Econometrics Research Institute (EERI), Brussels.
  5. Michael Beckmann & Dieter Kuhn, 2012. "Flexibility vs. screening: The performance effects of temporary agency work strategies," Working papers 2012/03, Faculty of Business and Economics - University of Basel.
  6. Addessi, William, 2014. "The productivity effect of permanent and temporary labor contracts in the Italian manufacturing sector," Economic Modelling, Elsevier, vol. 36(C), pages 666-672.
  7. Fuss, Catherine, 2009. "What is the most flexible component of wage bill adjustment? Evidence from Belgium," Labour Economics, Elsevier, vol. 16(3), pages 320-329, June.
  8. Pasquale Tridico, 2013. "Italy: From Economic Decline to the Current crisis," Departmental Working Papers of Economics - University 'Roma Tre' 0173, Department of Economics - University Roma Tre.
  9. Haibo Zhou & Ronald Dekker & Alfred Kleinknecht, 2011. "Flexible labor and innovation performance: evidence from longitudinal firm-level data," Industrial and Corporate Change, Oxford University Press, vol. 20(3), pages 941-968, June.
  10. Muhammad Imran Malik & Dr. Mehboob Ahmad, 2011. "Lucky or Unlucky people: Layoff Survivors," Far East Journal of Psychology and Business, Far East Research Centre, vol. 2(2), pages 23-35, March.
  11. Sebastian Nielen & Alexander Schiersch, 2012. "Productivity in German manufacturing firms: Does fixed-term employment matter?," Schumpeter Discussion Papers sdp12004, Universitätsbibliothek Wuppertal, University Library.
  12. Lindič, Jaka & Bavdaž, Mojca & Kovačič, Helena, 2012. "Higher growth through the Blue Ocean Strategy: Implications for economic policy," Research Policy, Elsevier, vol. 41(5), pages 928-938.

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