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On the Determinants of Labour Market Institutions: Rent-sharing vs. Social Insurance

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  • Agell, J.

Abstract

What determines the structure of labour market institutions? This paper argues that common explanations based on rent sharing are incomplete; unions, job protection, and egalitarian pay structures may have as much to do with social insurance of otherwise uninsurable risks as with rent sharing and vested interests. In support of this more benign complementary hypothesis the paper presents a range of historical, theoretical, and cross-country regression evidence. The social insurance perspective changes substantially the assessment of often-proposed reforms of European labour market institutions. The benefits from eliminating labour market rigidities have to be set against the costs of reduced coverage of human capital related risk. The paper also argues that it is unclear whether the forces of globalisation, and the new economy, will really force countries to make their labour markets more flexible. While these phenomena may increase the efficiency costs of existing institutions, they may also make people more willing to pay a high premium to preserve institutions that provide insurance.

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Bibliographic Info

Paper provided by Uppsala - Working Paper Series in its series Papers with number 2000-16.

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Length: 41 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:fth:uppaal:2000-16

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Postal: UPPSALA UNIVERSITY, DEPARTMENT OF ECONOMICS, S-751 20 UPPSALA SWEDEN.
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
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Web page: http://www.nek.uu.se/
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Keywords: LABOUR MARKET ; INSURANCE ; MODELS;

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References

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  1. Eaton, Jonathan & Rosen, Harvey S, 1980. "Optimal Redistributive Taxation and Uncertainty," The Quarterly Journal of Economics, MIT Press, vol. 95(2), pages 357-64, September.
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  5. Alan Krueger, 1999. "From Bismarck to Maastricht: The March to European Union and the Labor Compact," Working Papers 803, Princeton University, Department of Economics, Industrial Relations Section..
  6. Agell, J. & Lommerud, K.E., 1990. "Union Egalitarianism As Income Insurance," Papers 1990a, Uppsala - Working Paper Series.
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  10. Hans-Werner Sinn, 1995. "Social Insurance, Incentives, and Risk Taking," NBER Working Papers 5335, National Bureau of Economic Research, Inc.
  11. Sinn, Hans-Werner, 1995. "A Theory of the Welfare State," CEPR Discussion Papers 1278, C.E.P.R. Discussion Papers.
  12. A. B. Atkinson, 1999. "The Economic Consequences of Rolling Back the Welfare State," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011719, December.
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  14. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October.
  15. Krueger, Alan B., 2000. "From Bismarck to Maastricht: The March to European Union and the Labor Compact1," Labour Economics, Elsevier, vol. 7(2), pages 117-134, March.
  16. Rebecca M. Blank & Richard B. Freeman, 1993. "Evaluating the Connection Between Social Protection and Economic Flexib ility," NBER Working Papers 4338, National Bureau of Economic Research, Inc.
  17. Stephen Machin & Alan Manning, 1992. "Minimum Wages," CEP Discussion Papers dp0080, Centre for Economic Performance, LSE.
  18. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  19. Richard Layard & Stephen Nickell, 1998. "Labour Market Institutions and Economic Performance," CEP Discussion Papers dp0407, Centre for Economic Performance, LSE.
  20. Easterly, W & Levine, R, 1996. "Africa's Growth Tragedy : Policies and Ethnic Divisions," Papers 536, Harvard - Institute for International Development.
  21. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  22. Varian, Hal R., 1980. "Redistributive taxation as social insurance," Journal of Public Economics, Elsevier, vol. 14(1), pages 49-68, August.
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  24. Piore, Michael J, 1987. "Historical Perspectives and the Interpretation of Unemployment," Journal of Economic Literature, American Economic Association, vol. 25(4), pages 1834-50, December.
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Cited by:
  1. Schob, Ronnie, 2002. "Public Profit Sharing," Kyklos, Wiley Blackwell, vol. 55(4), pages 523-41.
  2. Wolfgang Ochel, 2002. "International Comparisons and Transfer of Labour Market Institutions," CESifo Working Paper Series 788, CESifo Group Munich.
  3. Andersen, Torben M., 2005. "Product market integration, wage dispersion and unemployment," Labour Economics, Elsevier, vol. 12(3), pages 379-406, June.
  4. Thomas Eichner & Andreas Wagener, 2002. "Increases in Risk and the Welfare State," CESifo Working Paper Series 685, CESifo Group Munich.

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