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Labor Market Institutions Around the World

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  • Richard B. Freeman

Abstract

The paper documents the large cross-country differences in labor institutions that make them a candidate explanatory factor for the divergent economic performance of countries and reviews what economists have learned about the effects of these institutions on economic outcomes. It identifies three ways in which institutions affect economic performance: by altering incentives, by facilitating efficient bargaining, and by increasing information, communication, and trust. The evidence shows that labor institutions reduce the dispersion of earnings and income inequality, which alters incentives, but finds equivocal effects on other aggregate outcomes, such as employment and unemployment. Given weaknesses in the cross-country data on which most studies focus, the paper argues for increased use of micro-data, simulations, and experiments to illuminate how labor institutions operate and affect outcomes.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13242.

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Date of creation: Jul 2007
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Publication status: published as Pub. date: 2008 | Online Pub. Date: October 01, 2010 | DOI:http://dx.doi.org/10.4135/9781849200431 | Print ISBN: 9781412911542 | Online ISBN: 9781849200431 | Publisher:SAGE Publications Ltd
Handle: RePEc:nbr:nberwo:13242

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  1. Lars Ljungqvist & Thomas J. Sargent, 1996. "The European Unemployment Dilemma," EUI-RSCAS Working Papers 36, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
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  6. Richard B. Freeman, 2005. "Labour Market Institutions Without Blinders: The Debate over Flexibility and Labour Market Performance," NBER Working Papers 11286, National Bureau of Economic Research, Inc.
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  26. 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.
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  28. Nickell, Stephen & Bell, Brian, 1996. "Changes in the Distribution of Wages and Unemployment in OECD Countries," American Economic Review, American Economic Association, vol. 86(2), pages 302-08, May.
  29. Rogers, Joel & Streeck, Wolfgang (ed.), 1995. "Works Councils," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226723761, янваÑ.
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  31. David R. Howell & Dean Baker & Andrew Glyn & John Schmitt, 2006. "Are Protective Labor Market Institutions Really at the Root of Unemployment? A Critical Perspective on the Statistical Evidence," CEPR Reports and Issue Briefs 2006-14, Center for Economic and Policy Research (CEPR).
  32. Gode, Dhananjay K & Sunder, Shyam, 1993. "Allocative Efficiency of Markets with Zero-Intelligence Traders: Market as a Partial Substitute for Individual Rationality," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 119-37, February.
  33. Holmlund, Bertil & Zetterberg, Johnny, 1991. "Insider effects in wage determination : Evidence from five countries," European Economic Review, Elsevier, vol. 35(5), pages 1009-1034, July.
  34. Marco Manacorda, 2004. "Can the Scala Mobile Explain the Fall and Rise of Earnings Inequality in Italy? A Semiparametric Analysis, 19771993," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 585-614, July.
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