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Labor Market Institutions Around the World

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  • Richard Freeman

Abstract

This paper documents the large cross-country differences in labor institutions that make them a candidate explanatory factor for the divergent economic performance of countries and reviews what economists have learned about the effects of these institutions on economic outcomes. It identifies three ways in which institutions affect economic performance: by altering incentives, by facilitating efficient bargaining, and by increasing information, communication, and trust. The evidence shows that labor institutions reduce the dispersion of earnings and income inequality, which alters incentives, but finds equivocal effects on other aggregate outcomes, such as employment and unemployment. Given weaknesses in the crosscountry data on which most studies focus, the paper argues for increased use of micro-data, simulations, and experiments to illuminate how labor institutions operate and affect outcomes.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0844.

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Date of creation: Jan 2008
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Handle: RePEc:cep:cepdps:dp0844

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: labour market; unemployment;

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  1. Freeman, Richard B. & Weitzman, Martin L., 1987. "Bonuses and employment in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 1(2), pages 168-194, June.
  2. Amil Petrin & Jagadeesh Sivadasan, 2006. "Job Security Does Affect Economic Efficiency: Theory, A New Statistic, and Evidence from Chile," NBER Working Papers 12757, National Bureau of Economic Research, Inc.
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  7. Gode, Dhananjay K & Sunder, Shyam, 1993. "Allocative Efficiency of Markets with Zero-Intelligence Traders: Market as a Partial Substitute for Individual Rationality," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(1), pages 119-37, February.
  8. Davin Chor & Richard B. Freeman, 2005. "The 2004 Global Labor Survey : Workplace Institutions and Practices Around the World," Labor Economics Working Papers 22066, East Asian Bureau of Economic Research.
  9. Freeman, Richard B, 1993. "Labor Markets and Institutions in Economic Development," American Economic Review, American Economic Association, American Economic Association, vol. 83(2), pages 403-08, May.
  10. Stephen Nickell & Luca Nunziata & Wolfgang Ochel, 2005. "Unemployment in the OECD Since the 1960s. What Do We Know?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 115(500), pages 1-27, 01.
  11. David Card & Thomas Lemieux & W. Craig Riddell, 2004. "Unions and Wage Inequality," Journal of Labor Research, Transaction Publishers, Transaction Publishers, vol. 25(4), pages 519-562, October.
  12. Michael Neugart, 2004. "Endogenous Matching Functions: An Agent-Based Computational Approach," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., World Scientific Publishing Co. Pte. Ltd., vol. 7(02), pages 187-201.
  13. John P Martin, 1998. "What Works Among Active Labour Market Policies: Evidence from OECD Countries' Experiences," RBA Annual Conference Volume, in: Guy Debelle & Jeff Borland (ed.), Unemployment and the Australian Labour Market Reserve Bank of Australia.
  14. Freeman, Richard B, 1984. "Longitudinal Analyses of the Effects of Trade Unions," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 2(1), pages 1-26, January.
  15. Ljungqvist, Lars & Sargent, Thomas J, 2004. "European Unemployment and Turbulence Revisited in a Matching Model," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4183, C.E.P.R. Discussion Papers.
  16. Alan Manning, 2010. "Imperfect Competition in the Labour Market," CEP Discussion Papers dp0981, Centre for Economic Performance, LSE.
  17. Pereira, Pedro T. & Martins, Pedro S., 2001. "Returns to Education and Wage Equations," IZA Discussion Papers 298, Institute for the Study of Labor (IZA).
  18. Richard Freeman, 2005. "Labour market institutions without blinders: The debate over flexibility and labour market performance," International Economic Journal, Taylor & Francis Journals, Taylor & Francis Journals, vol. 19(2), pages 129-145.
  19. Elliott Peranson & Alvin E. Roth, 1999. "The Redesign of the Matching Market for American Physicians: Some Engineering Aspects of Economic Design," American Economic Review, American Economic Association, American Economic Association, vol. 89(4), pages 748-780, September.
  20. Marco Manacorda, 2004. "Can the Scala Mobile Explain the Fall and Rise of Earnings Inequality in Italy? A Semiparametric Analysis, 19771993," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 22(3), pages 585-614, July.
  21. Jackson, Matthew O., 1999. "A Crash Course in Implementation Theory," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 1076, California Institute of Technology, Division of the Humanities and Social Sciences.
  22. Alberto Abadie & Alexis Diamond & Jens Hainmueller, 2007. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California's Tobacco Control Program," NBER Working Papers 12831, National Bureau of Economic Research, Inc.
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  24. repec:ucp:bknber:9780226723761 is not listed on IDEAS
  25. Richard B. Freeman, 2006. "Searching for the EU Social Dialogue Model," NBER Working Papers 12306, National Bureau of Economic Research, Inc.
  26. Richard B. Freeman & Edward P. Lazear, 1995. "An Economic Analysis of Works Councils," NBER Chapters, in: Works Councils: Consultation, Representation, and Cooperation in Industrial Relations, pages 27-52 National Bureau of Economic Research, Inc.
  27. Andrew Glyn, 2003. "Labor Market Institutions and Unemployment: A Critical Assessment of the Cross-Country Evidence," Economics Series Working Papers 168, University of Oxford, Department of Economics.
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  29. Soskice, David, 1990. "Wage Determination: The Changing Role of Institutions in Advanced Industrialized Countries," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 6(4), pages 36-61, Winter.
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  31. David R. Howell & Dean Baker & Andrew Glyn & John Schmitt, 2006. "Are Protective Labor Market Institutions Really at the Root of Unemployment? A Critical Perspective on the Statistical Evidence," CEPR Reports and Issue Briefs, Center for Economic and Policy Research (CEPR) 2006-14, Center for Economic and Policy Research (CEPR).
  32. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, October.
  33. Blanchflower, David G., 2001. "Unemployment, Well-Being, and Wage Curves in Eastern and Central Europe," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 364-402, December.
  34. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
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