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Assessing the Long-Run Economic Impact of Labour Law Systems: A Theoretical Reappraisal and Analysis of New Time Series Data

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  • Simon Deakin

    (University of Cambridge)

  • Prabirjit Sarkar

    (Jadavpur University, Kolkata)

Abstract

Standard economic theory sees labour law as an exogenous interference with market relations and predicts mostly negative impacts on employment and productivity. We argue for a more nuanced theoretical position: labour law is, at least in part, endogenous, with both the production and the application of labour law norms influenced by national and sectoral contexts, and by complementarities between the institutions of the labour market and those of corporate governance and financial markets. Legal origin may also operate as a force shaping the content of the law and its economic impact. Time-series analysis using a new dataset on legal change from the 1970s to the mid-2000s shows evidence of positive correlations between regulation and growth in employment and productivity, at least for France and Germany. No relationship, either positive or negative is found for the UK and although the US shows a weak negative relationship between regulation and employment growth, this is offset by productivity gains.vestigation but it is premature to use legal origin theory as a basis for policy initiatives.

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Bibliographic Info

Paper provided by ESRC World Economy and Finance Research Programme, Birkbeck, University of London in its series WEF Working Papers with number 0043.

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Date of creation: Sep 2008
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Handle: RePEc:wef:wpaper:0043

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Keywords: labour law; employment; productivity; redistribution; complementarities; legal origins; varieties of capitalism;

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References

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  1. Autor, David & Kerr, William & Kugler, Adriana, 2007. "Do Employment Protections Reduce Productivity? Evidence from U.S. States," IZA Discussion Papers 2571, Institute for the Study of Labor (IZA).
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Citations

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Cited by:
  1. Deakin, S. & Sarkar, P., 2011. "Indian Labour Law and its Impact on Unemployment, 1970-2006: A leximetric study," ESRC Centre for Business Research - Working Papers wp428, ESRC Centre for Business Research.
  2. Anastasia Koutsomanoli-Filippaki & Emmanuel Mamatzakis, 2013. "How labour market regulation shapes bank performance in EU-15 countries?," Working Papers 162, Bank of Greece.
  3. Simon Deakin, 2008. "Legal Origin, Juridical Form and Industrialisation in Historical Perspective: The Case of the Employment Contract and the Joint-Stock Company," ESRC Centre for Business Research - Working Papers wp369, ESRC Centre for Business Research.
  4. Sarkar, Prabirjit, 2011. "Does employment protection lead to unemployment? A panel data analysis of OECD countries, 1990-2008," MPRA Paper 35547, University Library of Munich, Germany.
  5. Deakin, Simon, 2013. "Addressing labour market segmentation : the role of labour law," ILO Working Papers 483448, International Labour Organization.
  6. Mathias Siems, 2009. "Shareholder, Creditor and Worker Protection: Time Series Evidence about the Differences between French, German, Idian, UK and US Law," ESRC Centre for Business Research - Working Papers wp381, ESRC Centre for Business Research.
  7. Deakin, Simon & Sarkar, Prabirjit & Singh, Ajit, 2010. "An End to Consensus? The (Non) Impact of Legal Reforms on Financial Development," MPRA Paper 53352, University Library of Munich, Germany.
  8. John Armour & Simon Deakin & Priya Lele & Mathias Siems, 2009. "How Do Legal Rules Evolve? Evidence from a cross-country Comparison of Shareholder, Creditor and Worker Protection," ESRC Centre for Business Research - Working Papers wp382, ESRC Centre for Business Research.
  9. Simon Deakin, 2008. "Legal Origin, Juridical Form and Industrialisation in Historical Perspective: The Case of the Employment Contract and the Joint-Stock Company," WEF Working Papers 0042, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
  10. Frick, Bernd & Malo, Miguel A. & Garcia Martinez, Pilar & Schneider, Martin, 2012. "The Demand for Individual Grievance Procedures in Germany and Spain: Labour Law Changes versus Business Cycle/La demanda de reclamaciones laborales individuales en Alemania y España: Derecho Laboral ," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 30, pages 283-310, Abril.
  11. Armour, J. & Deakin, S. & Mollica, V. & Siems, M.M., 2010. "Law and Financial Development: What we are learning from time-series evidence," ESRC Centre for Business Research - Working Papers wp399, ESRC Centre for Business Research.
  12. Wolfgang Ochel, 2009. "Employment Protection: Concepts and Measurement," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 7(2), pages 30-38, 07.

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