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Employment and Productivity Growth in Europe and North America: The Impact of Labor Market Institutions

  • Robert Buchele
  • Jens Christiansen
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    In this paper, we examine long-run employment and productivity growth in the major economies of North America and Europe from 1960 to the early 1990s. We develop a model in which output growth is determined by the growth of aggregate demand, and the relative contributions of employment and productivity growth to the growth of output depend on country specific labor market institutions. We find that institutions that promote collective bargaining, employment security and social protection have roughly equal and opposite effects on employment growth (negative) and productivity growth (positive), giving rise to an inverse relationship between these variables. The welfare implications of this finding are that labor market deregulation could result in more work and greater inequality and insecurity for workers, without significantly increasing the rate of economic growth.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/026921799101571
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    Article provided by Taylor & Francis Journals in its journal International Review of Applied Economics.

    Volume (Year): 13 (1999)
    Issue (Month): 3 ()
    Pages: 313-332

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    Handle: RePEc:taf:irapec:v:13:y:1999:i:3:p:313-332
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    1. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    2. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
    3. Annamaria Simonazzi & Paola Villa, 1999. "Flexibility and Growth," International Review of Applied Economics, Taylor & Francis Journals, vol. 13(3), pages 281-311.
    4. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
    5. Buchele, Robert & Christiansen, Jens, 1998. "Do Employment and Income Security Cause Unemployment? A Comparative Study of the US and the E-4," Cambridge Journal of Economics, Oxford University Press, vol. 22(1), pages 117-36, January.
    6. William T. Dickens & Lawrence F. Katz, 1986. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
    7. Blondal, Sveinbjorn & Pearson, Mark, 1995. "Unemployment and Other Non-employment Benefits," Oxford Review of Economic Policy, Oxford University Press, vol. 11(1), pages 136-69, Spring.
    8. Kaufman, Roger T., 1988. "An international comparison of Okun's laws," Journal of Comparative Economics, Elsevier, vol. 12(2), pages 182-203, June.
    9. Paul Krugman, 1994. "Past and prospective causes of high unemployment," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Jan, pages 49-98.
    10. Robert J. Gordon, 1995. "Is There a Tradeoff between Unemployment and Productivity Growth?," NBER Working Papers 5081, National Bureau of Economic Research, Inc.
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