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Labour Market Institutions and their Effect on Labour Market Performance in the New EU Member Countries

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  • Kamila Fialová
  • Ondrej Schneider

Abstract

This article focuses on the role of labour market institutions in explaining different labour market developments in European countries, with a special attention to the new European Union member countries. This may allow us to analyse effects of various institutional setups and of their changes on major labour market indicators. We aim at complementing several studies from the late 1990’s by using more recent data that allow us to compare institutional setups from the mid 1990’s and early 2000’s both in “old” and “new” EU member states. We estimate effects of labour market institutions on various performance indicators (unemployment, long-term unemployment, employment, activity rate). Our results confirm that high taxes increase unemployment, while active labour market policies tend to reduce it. We also show that stricter employment protection, higher taxes and larger economic burden represented by the minimum wage decrease employment and activity rate. Moreover, statistical tests indicate that there is a difference in the institutional effects between “old” and “new” EU members.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2421.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2421

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Keywords: labour market; unemployment; European Union; labour market institutions;

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References

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  1. Tito Boeri, 2005. "Reforming Labor and Product Markets," IMF Working Papers 05/97, International Monetary Fund.
  2. Daveri, Francesco & Tabellini, Guido, 1997. "Unemployment, Growth and Taxation in Industrial Countries," CEPR Discussion Papers 1681, C.E.P.R. Discussion Papers.
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  8. Teulings,Coen & Hartog,Joop, 2008. "Corporatism or Competition?," Cambridge Books, Cambridge University Press, number 9780521049399, April.
  9. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  10. Howell David R. & Baker Dean & Glyn Andrew & Schmitt John, 2007. "Are Protective Labor Market Institutions at the Root of Unemployment? A Critical Review of the Evidence," Capitalism and Society, De Gruyter, vol. 2(1), pages 1-73, May.
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  12. Saint-Paul, Gilles, 1996. "Understanding Labour Market Institutions: A Political Economy Perspective," CEPR Discussion Papers 1438, C.E.P.R. Discussion Papers.
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  16. 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.
  17. Michael Lechner & Conny Wunsch, 2009. "Active labour market policy in East Germany," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(4), pages 661-702, October.
  18. 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.
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Citations

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Cited by:
  1. Alfonso Arpaia & Gilles Mourre, 2009. "Institutions and Performance in European Labour Markets: Taking a Fresh Look at Evidence," Working Papers CEB 09-049.RS, ULB -- Universite Libre de Bruxelles.
  2. Lehmann, Hartmut & Muravyev, Alexander, 2011. "Labor Markets and Labor Market Institutions in Transition Economies," IZA Discussion Papers 5905, Institute for the Study of Labor (IZA).
  3. Jens Holscher & Cristiano Perugini & Fabrizio Pompei, 2011. "Wage inequality, labour market flexibility and duality in Eastern and Western Europe," Post-Communist Economies, Taylor & Francis Journals, vol. 23(3), pages 271-310.
  4. Fatih Macit, 2012. "Labor Market Institutions and Labor Productivity Growth," Economic Research Guardian, Weissberg Publishing, vol. 2(1), pages 121-128, May.
  5. Bergljot Barkbu & Jesmin Rahman & Rodrigo O. Valdés, 2012. "Fostering Growth in Europe Now," IMF Staff Discussion Notes 12/07, International Monetary Fund.
  6. Kamila Fialová, 2010. "Labor Institutions and their Impact on Shadow Economies in Europe," Working Papers IES 2010/29, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Dec 2010.
  7. Gill, Indermit & Koettl, Johannes & Packard, Truman, 2013. "Full Employment: A Distant Dream for Europe," IZA Discussion Papers 7663, Institute for the Study of Labor (IZA).
  8. Cristiano Perugini & Ekaterina Selezneva, 2013. "Labour Market Institutions, Crisis and Gender Earnings Gap in Eastern Europe," Working Papers 328, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies).
  9. H. Lehmann & A. Muravyev, 2010. "Labor market institutions and labor market performance: what can we learn from transition countries?," Working Papers 714, Dipartimento Scienze Economiche, Universita' di Bologna.
  10. Hazans, Mihails, 2011. "What Explains Prevalence of Informal Employment in European Countries: The Role of Labor Institutions, Governance, Immigrants, and Growth," IZA Discussion Papers 5872, Institute for the Study of Labor (IZA).
  11. Edoardo Di Porto & Leandro Elia & Cristina Tealdi, 2013. "The "emersion" effect: an ex post and ex ante social program evaluation on labor tax evasion in Italy," Working Papers 2/2013, IMT Institute for Advanced Studies Lucca, revised Jun 2013.
  12. Kamila Fialová & Martina Mysíková, 2009. "The Minimum Wage: Labor Market Consequences in the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(3), pages 255-274, August.

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