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Labor and product market reforms: questioning policy complementarity

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  • Bruno Amable
  • Donatella Gatti

Abstract

This article proposes a dynamic efficiency wages model with imperfect competition on labor and product markets. In this framework, job insecurity generates a perverse effect on workers incentives, which shifts up the real wages schedule and may yield employment losses. Product market regulation and redundancy payments contribute to reducing labor turnover, thus easing the workers incentive constraint. Consequently, and against conventional wisdom, regulations may have a positive impact on employment, and a substitution effect may emerge across deregulation policies. Moreover, in some cases, a complementarity arises between regulations in product and labor markets, both interacting to ensure more stable labor relations. Copyright 2006, Oxford University Press.

Suggested Citation

  • Bruno Amable & Donatella Gatti, 2006. "Labor and product market reforms: questioning policy complementarity," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 15(1), pages 101-122, February.
  • Handle: RePEc:oup:indcch:v:15:y:2006:i:1:p:101-122
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    Cited by:

    1. Bernhard Boockmann & Raimund Krumm & Michael Neumann & Pia Rattenhuber, 2013. "Turning the Switch: An Evaluation of the Minimum Wage in the German Electrical Trade Using Repeated Natural Experiments," German Economic Review, Verein für Socialpolitik, vol. 14(3), pages 316-348, August.
    2. Bernhard Boockmann, 2010. "The Combined Employment Effects of Minimum Wages and Labor Market Regulation—a Meta-Analysis," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 61(Supplemen), pages 167-188.
    3. Donatella Gatti & Christophe Rault & Anne-Gael Vaubourg, 2012. "Unemployment and finance: how do financial and labour market factors interact?," Oxford Economic Papers, Oxford University Press, vol. 64(3), pages 464-489, July.
    4. Bruno Amable, 2009. "Structural reforms in Europe and the (in)coherence of institutions," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 25(1), pages 17-39, Spring.
    5. repec:crs:ecosta:es419-420b is not listed on IDEAS
    6. Rault, Christophe & Vaubourg, Anne-Gaël, 2011. "Labour Market Institutions and Unemployment: Does Finance Matter?," IZA Discussion Papers 5606, Institute of Labor Economics (IZA).
    7. Donatella Gatti & Anne-Gael Vaubourg, 2010. "Credit and Unemployment: Do Institutions Matter?," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(01), pages 37-43, April.
    8. Bruno Amable & Lilas Demmou & Ivan Ledezma, 2009. "The Lisbon strategy and structural reforms in Europe," Transfer: European Review of Labour and Research, , vol. 15(1), pages 33-52, February.
    9. Philippe Aghion & Philippe Askenazy & Renaud Bourlès & Gilbert Cette & Nicolas Dromel, 2008. "Distance à la frontière technologique, rigidités de marché, éducation et croissance," Économie et Statistique, Programme National Persée, vol. 419(1), pages 11-30.
    10. Eduardo Rodriguez-Oreggia & Hector Moreno Moreno & David Mulato Martinez, 2008. "Has product market competition reshaped returns to schooling in Mexico?," EconoQuantum, Revista de Economia y Finanzas, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 5(1), pages 61-77, Julio-Dic.
    11. Silvia Fedeli & Vitantonio Mariella & Marco Onofri, 2018. "Determinants of Joblessness During the Economic Crisis: Impact of Criminality in the Italian Labour Market," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 139(2), pages 559-588, September.
    12. Bruno Amable & Lilas Demmou & Donatella Gatti, 2007. "Employment Performance and Institutions: New Answers to an Old Question," Working Papers hal-04021096, HAL.
    13. Gilbert Cette & Jimmy Lopez, 2012. "ICT demand behaviour: an international comparison," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 21(4), pages 397-410, June.
    14. Campos, Nauro F. & De Grauwe, Paul & Ji, Yuemei, 2023. "Structural reforms and economic performance: the experience of advanced economies," LSE Research Online Documents on Economics 120870, London School of Economics and Political Science, LSE Library.
    15. Vesna Stavrevska, 2011. "The efficiency wages perspective to wage rigidity in the open economy: a survey," International Journal of Manpower, Emerald Group Publishing Limited, vol. 32(3), pages 273-299, June.
    16. Klaus Weyerstrass & Johannes Jaenicke, 2011. "Is more competition conducive to the macroeconomic performance in the euro area?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 38(3), pages 351-380, July.
    17. Bruno Amable & Lilas Demmou & Donatella Gatti, 2006. "Institutions, unemployment and inactivity in the OECD countries," Working Papers halshs-00590495, HAL.
    18. Gilbert Cette & Jimmy Lopez, 2008. "What Explains the ICT Diffusion Gap Between the Major Industrialized Countries: An Empirical Analysis?," International Productivity Monitor, Centre for the Study of Living Standards, vol. 17, pages 28-39, Fall.

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