Industrial Relations Systems, Economic Efficiency and Social Equity in the 1990s

A feature of many European countries after World War II was the kind of institutional arrangements that developed between capital and labour. A central question in the literature concerns whether neo-liberal competitive labour markets or organized corporatist labour markets are more efficient. In this paper the economic and social outcomes from these different market arrangements are compared for a number of OECD countries from the 1980s to the end of the 20th century. Although, in the 1990s strongly corporatist countries remain a great deal more egalitarian than liberal market economies, the evidence from this paper indicates that the latter have outperformed countries with corporatist type arrangements regarding employment and economic growth. It appears that the economic dividend arising from strongly institutionalized industrial relations systems is no longer being delivered. Yet, the outcomes of liberal economic policies of deregulation are increasingly unequal societies. The challenge for advanced democratic societies is to deliver on both social equity and economic growth.