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Institutions and Economic Performance: Evidence from the Labour Market

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  • Eichengreen, Barry
  • Iversen, Torben

Abstract

We analyse the institutional determinants of economic performance, taking European labour-market institutions as a case in point. European economic growth after the Second World War was based on Fordist technologies, a setting to which the continent's institutions of solidaristic wage bargaining were ideally suited. They eased distributive conflicts and delivered wage moderation, which in turn supported high investment. The wage compression that was a corollary of their operation was of little consequence so long as the dominant technologies were such that firms could rely on a relatively homogeneous labour force. But as Fordism gave way to diversified quality production, which relied more on highly skilled workers, the centralization of bargaining and the compression of wages became impediments rather than aids to growth. Assuming that growth will rely even more in the future on rapidly changing, science-based, skilled-labour-intensive technologies, countries with centralized labour-market institutions will have to move still further in the direction of decentralization. Whether Europe in particular can accommodate these demands will help to determine whether it is able to re-establish a full employment economy in the twenty-first century. Copyright 1999 by Oxford University Press.

Suggested Citation

  • Eichengreen, Barry & Iversen, Torben, 1999. "Institutions and Economic Performance: Evidence from the Labour Market," Oxford Review of Economic Policy, Oxford University Press, vol. 15(4), pages 121-138, Winter.
  • Handle: RePEc:oup:oxford:v:15:y:1999:i:4:p:121-38
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    Cited by:

    1. Tekleselassie, Tsegay Gebrekidan, 2016. "Three essays on the impact of institutions and policies on socio-economic outcomes," Economics PhD Theses 1316, Department of Economics, University of Sussex.
    2. Gavin Cameron & Chris Wallace, 2002. "Macroeconomic Performance in the Bretton Woods Era and After," Oxford Review of Economic Policy, Oxford University Press, vol. 18(4), pages 479-494.
    3. 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.
    4. repec:wdi:papers:2011-1029 is not listed on IDEAS
    5. Sumon Kumar Bhaumik & Ralitza Dimova, 2014. "Good and bad institutions: is the debate over? Cross-country firm-level evidence from the textile industry," Cambridge Journal of Economics, Oxford University Press, vol. 38(1), pages 109-126.
    6. Floro Ernesto Caroleo, 2000. "Le politiche per l'occupazione in Europa: una tassonomia istituzionale," STUDI ECONOMICI, FrancoAngeli Editore, vol. 2000(71).
    7. Baccaro, Lucio & Simoni, Marco, 2010. "Organizational determinants of wage moderation," LSE Research Online Documents on Economics 33510, London School of Economics and Political Science, LSE Library.
    8. Peter Mooslechner & Martin Schürz, 2001. "The Interaction of Wage Bargaining Institutions and an Independent Central Bank – A Methodological Reflection on Current Theories," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 28(4), pages 487-506, December.
    9. Sumon Bhaumik & Ralitza Dimova & Subal C. Kumbhakar & Kai Sun, 2012. "Does Institutional Quality Affect Firm Performance? Insights from a Semi-Parametric Approach," William Davidson Institute Working Papers Series wp1029, William Davidson Institute at the University of Michigan.
    10. Wolfgang Pollan, 2004. "Pattern Bargaining and Wage Leadership in Austria," WIFO Monatsberichte (monthly reports), WIFO, vol. 77(3), pages 197-211, March.
    11. Doner, Richard, 2012. "Success as Trap? Crisis Response And Challenges To Economic Upgrading in Export-Oriented Southeast Asia," Working Papers 45, JICA Research Institute.
    12. Sauro Mocetti, 2004. "Social Protection and Human Capital: Test of a Hypothesis," Department of Economics University of Siena 425, Department of Economics, University of Siena.

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