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

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  • 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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Bibliographic 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

Contact details of provider:
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
Email:
Web page: http://www.nek.uu.se/
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Keywords: Labour market institutions; comparative historical evidence; Sweden; Massachusetts; rent seeking; social insurance; union models; cross-country regressions; openness; linguistic fractionalisation;

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References

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  1. Rodrik, Dani, 1996. "Why do More Open Economies Have Bigger Governments?," CEPR Discussion Papers 1388, C.E.P.R. Discussion Papers.
  2. Agell, J. & Lommerud, K.E., 1990. "Union Egalitarianism As Income Insurance," Papers 1990a, Uppsala - Working Paper Series.
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  8. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  9. 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.
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  13. Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084 Elsevier.
  14. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
  15. Easterly, W & Levine, R, 1996. "Africa's Growth Tragedy : Policies and Ethnic Divisions," Papers 536, Harvard - Institute for International Development.
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  17. 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.
  18. Alan B. Krueger, 2000. "From Bismarck to Maastricht: The March to European Union and the Labor Compact," NBER Working Papers 7456, National Bureau of Economic Research, Inc.
  19. Anthony B. Atkinson, 1991. "Social Insurance," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 16(2), pages 113-131, December.
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  21. Sinn, Hans-Werner, 1996. "Social Insurance, Incentives and Risk Taking," Munich Reprints in Economics 19834, University of Munich, Department of Economics.
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  24. 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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Citations

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Cited by:
  1. Schob, Ronnie, 2002. "Public Profit Sharing," Kyklos, Wiley Blackwell, vol. 55(4), pages 523-41.
  2. Thomas Eichner & Andreas Wagener, 2002. "Increases in Risk and the Welfare State," CESifo Working Paper Series 685, CESifo Group Munich.
  3. Wolfgang Ochel, 2002. "International Comparisons and Transfer of Labour Market Institutions," CESifo Working Paper Series 788, CESifo Group Munich.
  4. Andersen, Torben M., 2005. "Product market integration, wage dispersion and unemployment," Labour Economics, Elsevier, vol. 12(3), pages 379-406, June.

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