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The Impact of Institutions on the Employment Performance in European Labour Markets

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  • H Buscher
  • C Dreger
  • R Ramos
  • J Surinach

Abstract

This paper investigates the role of the institutional framework for the labour market performance in EU countries. The point of departure is the labour demand equation that is derived from cost minimization behaviour of firms. Labour demand is expressed by its structural parameters, i.e. the output and real wage elasticity. Cointegration relationships between employment, output and wages are revealed by efficient estimation techniques. The long run parameters are explained by indicators for product and labour market institutions using panel fixed effects models. The results suggest that higher flexibility in the product and labour markets could be a strategy to improve the employment record. The response of employment to macroeconomic conditions is stronger in a more deregulated environment, and the absorption of shocks can be relieved.

Suggested Citation

  • H Buscher & C Dreger & R Ramos & J Surinach, 2009. "The Impact of Institutions on the Employment Performance in European Labour Markets," Economic Issues Journal Articles, Economic Issues, vol. 14(1), pages 17-34, March.
  • Handle: RePEc:eis:articl:109buscher
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    2. Herwartz, Helmut & Niebuhr, Annekatrin, 2011. "Regional labor demand and national labor market institutions in the EU15," HWWI Research Papers 112, Hamburg Institute of International Economics (HWWI).
    3. Sylwia Roszkowska & Aleksandra Rogut, 2010. "Wages, Prices and Unemployment in Poland," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 7-8, pages 21-43.
    4. Tvrdon, Michal, 2007. "Labour Market Flexibility: the Case of Visegrad Countries," MPRA Paper 12314, University Library of Munich, Germany.
    5. Federica Origo & Laura Pagani, 2006. "Is Work Flexibility a Stairway to Heaven? The Story Told by Job Satisfaction in Europ," Working Papers 97, University of Milano-Bicocca, Department of Economics, revised Jun 2006.
    6. Hanan Nazier, 2019. "Estimating Labor Demand Elasticities and Elasticities of Substitution in Egyptian Manufacturing Sector: A Firm-Level Static Analysis," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 62(4), pages 549-575, December.
    7. Michal Tvrdoň, 2008. "Institucionální aspekty fungování trhu práce [Institutional aspects of labour market]," Politická ekonomie, Prague University of Economics and Business, vol. 2008(5), pages 621-642.
    8. Ansgar Belke & Bernhard Herz & Lukas Vogel, 2007. "Reforms, Exchange Rates and Monetary Commitment: A Panel Analysis for OECD Countries," Open Economies Review, Springer, vol. 18(3), pages 369-388, July.
    9. Ansgar Belke & Bernhard Herz & Lukas Vogel, 2006. "Beyond Trade – Is Reform Effort Affected by the Exchange Rate Regime? A Panel Analysis for the World versus OECD Countries," Economie Internationale, CEPII research center, issue 107, pages 29-58.
    10. Kuddo, Arvo, 2009. "Labor laws in Eastern European and Central Asian countries : minimum norms and practices," Social Protection Discussion Papers and Notes 51698, The World Bank.

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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