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

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Author Info
Agell, Jonas () (Department of Economics)
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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Publisher Info
Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2000:16.

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Length: 41 pages
Date of creation: 01 Nov 2000
Date of revision:
Publication status: Published in German Economic Review 3, 2002.
Handle: RePEc:hhs:uunewp:2000_016

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Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-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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Related research
Keywords: Labour market institutions; comparative historical evidence; Sweden; Massachusetts; rent seeking; social insurance; union models; cross-country regressions; openness; linguistic fractionalisation;

Find related papers by JEL classification:
J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
N30 - Economic History - - Labor and Consumers, Demography, Education, Income, and Wealth - - - General, International, or Comparative

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  19. Stephen Machin & Alan Manning, 1992. "Minimum Wages," CEP Discussion Papers dp0080, Centre for Economic Performance, LSE.
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