IDEAS home Printed from https://ideas.repec.org/a/spr/joevec/v18y2008i3p477-492.html
   My bibliography  Save this article

Labor market institutions and industrial performance: an evolutionary study

Author

Listed:
  • Yılmaz Kılıçaslan
  • Erol Taymaz

Abstract

This study investigates the impact of labor market institutions on industrial performance from a Schumpeterian perspective. We suggest that labor market institutions play a very important role in the process of creative destruction, because they may create an environment that encourages and enforces innovation, and help to reallocate resources, most importantly labor, through swift elimination of weak performers. We specifically look at the effects of the quantity of labor market regulations and inter-industry wage differentials on labor productivity for a panel of 44 countries for the period 1965–1999. Our findings suggest that those countries that introduce more regulations on conditions of employment and wages achieve higher levels of productivity. Moreover, wage compression raises productivity by reallocating resources to productive activities.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Yılmaz Kılıçaslan & Erol Taymaz, 2008. "Labor market institutions and industrial performance: an evolutionary study," Journal of Evolutionary Economics, Springer, vol. 18(3), pages 477-492, August.
  • Handle: RePEc:spr:joevec:v:18:y:2008:i:3:p:477-492
    DOI: 10.1007/s00191-008-0098-4
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s00191-008-0098-4
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1007/s00191-008-0098-4?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Sandra E. Black & Lisa M. Lynch, 2004. "What's driving the new economy?: the benefits of workplace innovation," Economic Journal, Royal Economic Society, vol. 114(493), pages 97-116, February.
    2. Seguino, Stephanie, 2007. "Is more mobility good?: Firm mobility and the low wage-low productivity trap," Structural Change and Economic Dynamics, Elsevier, vol. 18(1), pages 27-51, March.
    3. Giuseppe Nicoletti & Stefano Scarpetta & Olivier Boylaud, 2000. "Summary Indicators of Product Market Regulation with an Extension to Employment Protection Legislation," OECD Economics Department Working Papers 226, OECD Publishing.
    4. Alexopoulos, Michelle & Cohen, Jon, 2003. "Centralised wage bargaining and structural change in Sweden," European Review of Economic History, Cambridge University Press, vol. 7(3), pages 331-363, December.
    5. Hibbs, Douglas A, Jr & Locking, Hakan, 2000. "Wage Dispersion and Productive Efficiency: Evidence for Sweden," Journal of Labor Economics, University of Chicago Press, vol. 18(4), pages 755-782, October.
    6. Andrea Bassanini & Ekkehard Ernst, 2002. "Labour market regulation, industrial relations and technological regimes: a tale of comparative advantage," Industrial and Corporate Change, Oxford University Press, vol. 11(3), pages 391-426, June.
    7. Agell, Jonas, 1999. "On the Benefits from Rigid Labour Markets: Norms, Market Failures, and Social Insurance," Economic Journal, Royal Economic Society, vol. 109(453), pages 143-164, February.
    8. Juan C. Botero & Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "The Regulation of Labor," The Quarterly Journal of Economics, Oxford University Press, vol. 119(4), pages 1339-1382.
    9. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "The Structure of Wages and Investment in General Training," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 539-572, June.
    10. Timothy Besley & Robin Burgess, 2004. "Can Labor Regulation Hinder Economic Performance? Evidence from India," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 91-134.
    11. Acemoglu, Daron & Pischke, Jorn-Steffen, 1999. "Beyond Becker: Training in Imperfect Labour Markets," Economic Journal, Royal Economic Society, vol. 109(453), pages 112-142, February.
    12. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    13. Jonathan Michie & Maura Sheehan, 2003. "Labour market deregulation, 'flexibility' and innovation," Cambridge Journal of Economics, Oxford University Press, vol. 27(1), pages 123-143, January.
    14. Davis, Steven J. & Henrekson, Magnus, 2005. "Wage-setting institutions as industrial policy," Labour Economics, Elsevier, vol. 12(3), pages 345-377, June.
    15. Alfred Kleinknecht & Remco Oostendorp & Menno Pradhan & C. W. M. Naastepad, 2006. "Flexible Labour, Firm Performance and the Dutch Job Creation Miracle," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(2), pages 171-187.
    16. Xavier X. Sala-i-Martin, 1997. "I Just Ran Four Million Regressions," NBER Working Papers 6252, National Bureau of Economic Research, Inc.
    17. World Bank, 2002. "World Development Indicators 2002," World Bank Publications - Books, The World Bank Group, number 13921.
    18. Jan Fagerberg, 2002. "Technology, Growth and Competitiveness," Books, Edward Elgar Publishing, number 2577.
    19. Peter Cappelli, 2000. "Examining the Incidence of Downsizing and Its Effect on Establishment Performance," NBER Working Papers 7742, National Bureau of Economic Research, Inc.
    20. Sala-i-Martin, Xavier, 1997. "I Just Ran Two Million Regressions," American Economic Review, American Economic Association, vol. 87(2), pages 178-183, May.
    21. Alvaro Forteza & Martin Rama, 2006. "Labor Market 'Rigidity' and the Success of Economic Reforms Across More Than 100 Countries," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 9(1), pages 75-105.
    22. Cahuc, Pierre & Michel, Philippe, 1996. "Minimum wage unemployment and growth," European Economic Review, Elsevier, vol. 40(7), pages 1463-1482, August.
    23. Fabio Padovano & Emma Galli, 2003. "Corporatism, policies and growth," Economics of Governance, Springer, vol. 4(3), pages 245-260, November.
    24. Steven J. Davis, 2001. "The Quality Distribution of Jobs and the Structure of Wages in Search Equilibrium," NBER Working Papers 8434, National Bureau of Economic Research, Inc.
    25. Aykut Lenger & Erol Taymaz, 2007. "To innovate or to transfer?," Springer Books, in: Uwe Cantner & Franco Malerba (ed.), Innovation, Industrial Dynamics and Structural Transformation, pages 303-319, Springer.
    26. Toke Aidt & Zafiris Tzannatos, 2002. "Unions and Collective Bargaining : Economic Effects in a Global Environment," World Bank Publications - Books, The World Bank Group, number 15241.
    27. Gérard Ballot & Fathi Fakhfakh & Erol Taymaz, 2006. "Who Benefits from Training and R&D, the Firm or the Workers?," British Journal of Industrial Relations, London School of Economics, vol. 44(3), pages 473-495, September.
    28. Koeniger, Winfried, 2005. "Dismissal costs and innovation," Economics Letters, Elsevier, vol. 88(1), pages 79-84, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Norhayati Yahaya & Mohamad Sattar Rasul & Ruhizan Mohamad Yasin, 2017. "The Marketability of National Dual Training System (NDTS) Graduates in the Industry," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 7(6), pages 592-611, June.
    2. Carlo Gianelle, 2014. "Labor market intermediaries make the world smaller," Journal of Evolutionary Economics, Springer, vol. 24(5), pages 951-981, November.
    3. Barbosa, Natália & Faria, Ana Paula, 2011. "Innovation across Europe: How important are institutional differences?," Research Policy, Elsevier, vol. 40(9), pages 1157-1169.
    4. Yilmaz Kilicaslan & Ilhom Temurov, 2015. "New Lessons from an Old Strategy: Import Substitution, Productivity and Competitiveness," EconWorld Working Papers 15002, WERI-World Economic Research Institute, revised Dec 2015.
    5. Norhayati Yahaya & Mohamad Sattar Rasul & Ruhizan Mohamad Yasin, 2017. "The Attractiveness of National Dual Training System (NDTS) Graduates," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 7(6), pages 655-673, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alfred Kleinknecht, 2014. "Schaden Strukturreformen des Arbeitsmarkts der Innovation?," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 40(3), pages 417-428.
    2. Erol Taymaz & Sule Ozler, 2004. "Labor Market Policies and EU Accession: Problems and Prospects for Turkey," ERC Working Papers 0405, ERC - Economic Research Center, Middle East Technical University, revised Mar 2004.
    3. Pierre, Gaëlle & Scarpetta, Stefano, 2004. "Employment Regulations through the Eyes of Employers: Do They Matter and How Do Firms Respond to Them?," IZA Discussion Papers 1424, Institute of Labor Economics (IZA).
    4. Calderon, Cesar & Chong, Alberto & Leon, Gianmarco, 2007. "Institutional enforcement, labor-market rigidities, and economic performance," Emerging Markets Review, Elsevier, vol. 8(1), pages 38-49, March.
    5. Scarpetta, Stefano & Tressel, Thierry, 2004. "Boosting productivity via innovation and adoption of new technologies : any role for labor market institutions?," Social Protection Discussion Papers and Notes 29144, The World Bank.
    6. Robert VERGEER & Alfred KLEINKNECHT, 2014. "Do labour market reforms reduce labour productivity growth? A panel data analysis of 20 OECD countries (1960–2004)," International Labour Review, International Labour Organization, vol. 153(3), pages 365-393, September.
    7. Davis, Steven J. & Henrekson, Magnus, 2005. "Wage-setting institutions as industrial policy," Labour Economics, Elsevier, vol. 12(3), pages 345-377, June.
    8. Bernardo Fanfani, 2019. "The Employment Effects of Collective Bargaining," Working papers 064, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    9. Barbosa, Natália & Faria, Ana Paula, 2011. "Innovation across Europe: How important are institutional differences?," Research Policy, Elsevier, vol. 40(9), pages 1157-1169.
    10. Andrea Bassanini & Danielle Venn, 2008. "The Impact of Labour Market Policies on Productivity in OECD Countries," International Productivity Monitor, Centre for the Study of Living Standards, vol. 17, pages 3-15, Fall.
    11. Alfred Kleinknecht, 2017. "Supply-side labour market reforms: a neglected cause of the productivity crisis," Working Papers 0027, ASTRIL - Associazione Studi e Ricerche Interdisciplinari sul Lavoro.
    12. Raquel Fonseca Benito & Natalia Utrero, 2007. "Employment Protection Laws, Barriers to Entrepreneurship, Financial Markets and Firm Size," Working Papers 454, RAND Corporation.
    13. Kalyvas, Antonios Nikolaos & Mamatzakis, Emmanuel, 2014. "Does business regulation matter for banks in the European Union?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 32(C), pages 278-324.
    14. Mamatzakis, Emmanuel & Tsionas, Mike G. & Kumbhakar, Subal C. & Koutsomanoli-Filippaki, Anastasia, 2015. "Does labour regulation affect technical and allocative efficiency? Evidence from the banking industry," Journal of Banking & Finance, Elsevier, vol. 61(S1), pages 84-98.
    15. Robert Vergeer & Steven Dhondt & Alfred Kleinknecht & Karolus Kraan, 2015. "Will ‘structural reforms’ of labour markets reduce productivity growth? A firm-level investigation," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 12(3), pages 300—317-3, December.
    16. Zoe Adams & Louise Bishop & Simon Deakin & Colin Fenwick & Sara Martinsson Garzelli & Giudy Rusconi & Centre for Business Research, 2018. "The Economic Significance of Laws Relating to Employment Protection & Different Forms of Employment: Analysis of a Panel of 117 Countries, 1990-2013," Working Papers wp500, Centre for Business Research, University of Cambridge.
    17. Checchi, Daniele & Visser, Jelle & van de Werfhorst, Herman G., 2007. "Inequality and Union Membership: The Impact of Relative Earnings Position and Inequality Attitudes," IZA Discussion Papers 2691, Institute of Labor Economics (IZA).
    18. Heshmati Almas & Karlson Nils & Box Marcus, 2013. "Generality, State Neutrality and Unemployment in the OECD," Global Economy Journal, De Gruyter, vol. 13(3), pages 333-358, December.
    19. Viollaz, Mariana, 2016. "Enforcement of Labor Market Regulations: Heterogeneous Compliance and Adjustment across Gender," MPRA Paper 72000, University Library of Munich, Germany.
    20. Nicholas Bloom & Raffaella Sadun & John Van Reenen, 2012. "Americans Do IT Better: US Multinationals and the Productivity Miracle," American Economic Review, American Economic Association, vol. 102(1), pages 167-201, February.

    More about this item

    Keywords

    Labor market regulation; Flexibility; Industrial structure; Productivity; J8; J24; J31; O43; O47;
    All these keywords.

    JEL classification:

    • J8 - Labor and Demographic Economics - - Labor Standards
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:joevec:v:18:y:2008:i:3:p:477-492. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.