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

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Author Info
Kamila Fialová ()
Ondøej Schneider ()

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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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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2421.

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

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

Other versions of this item:

Find related papers by JEL classification:
J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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  1. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June. [Downloadable!] (restricted)
  2. Cahuc, Pierre & Michel, Philippe, 1996. "Minimum wage unemployment and growth," European Economic Review, Elsevier, vol. 40(7), pages 1463-1482, August. [Downloadable!] (restricted)
    Other versions:
  3. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR, CES, MSH, vol. 15(30), pages 47-104, 04. [Downloadable!] (restricted)
    Other versions:
  4. David Howell & Dean Baker & Andrew Glyn & John Schmitt, 2007. "Are Protective Labor Market Institutions at the Root of Unemployment? A Critical Review of the Evidence," Capitalism and Society, Berkeley Electronic Press, vol. 2(1), pages 1. [Downloadable!] (restricted)
  5. Griffith, Rachel & Harrison, Rupert & Macartney, Gareth, 2006. "Product Market Reforms, Labour Market Institutions and Unemployment," CEPR Discussion Papers 5599, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. 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. [Downloadable!]
    Other versions:
  7. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March. [Downloadable!] (restricted)
    Other versions:
  8. Saint-Paul, Gilles, 1996. "Understanding Labour Market Institutions: A Political Economy Perspective," CEPR Discussion Papers 1438, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  9. Tito Boeri, 2005. "Reforming Labor and Product Markets: Some Lessons from Two Decades of Experiments in Europe," IMF Working Papers 05/97, International Monetary Fund. [Downloadable!]
  10. 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. [Downloadable!] (restricted)
  11. Vladislav Flek & Jiří Večerník, 2005. "The Labor Market in the Czech Republic: Trends, Policies, and Attitudes (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 55(1-2), pages 5-24, January. [Downloadable!]
  12. Rebitzer, James B. & Taylor, Lowell J., 1995. "The consequences of minimum wage laws Some new theoretical ideas," Journal of Public Economics, Elsevier, vol. 56(2), pages 245-255, February. [Downloadable!] (restricted)
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  13. Nicola Brandt & Jean-Marc Burniaux & Romain Duval, 2005. "Assessing the OECD Jobs Strategy: Past Developments and Reforms," OECD Economics Department Working Papers 429, OECD, Economics Department. [Downloadable!]
  14. Stephen Nickell & Luca Nunziata & Wolfgang Ochel, 2005. "Unemployment in the OECD Since the 1960s. What Do We Know?," Economic Journal, Royal Economic Society, vol. 115(500), pages 1-27, 01. [Downloadable!] (restricted)
  15. Manning, Alan, 1995. "How Do We Know That Real Wages Are Too High?," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1111-25, November. [Downloadable!] (restricted)
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