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Employment Outcomes and the Interaction Between Product and Labor Market Deregulation: Are They Substitutes or Complements?

  • Giuseppe Fiori

    ()

    (Boston College)

  • Giuseppe Nicoletti

    (OECD)

  • Stefano Scarpetta

    (OECD
    IZA)

  • Fabio Schiantarelli

    ()

    (Boston College
    IZA)

This paper provides a systematic empirical investigation of the effect of product market liberalization on employment when there are interactions between policies and institutions in product and labor markets. Using panel data for OECD countries over the period 1980-2002, we present evidence that product market deregulation is more effective at the margin when labor market regulation is high. Moreover, there is evidence in our sample that product market deregulation promotes labor market deregulation. We show that these results are mostly consistent with the basic predictions of a standard bargaining model (e.g. Blanchard and Giavazzi (2003)), once one allows for a full specification of the fall back position of the unions.

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Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 663.

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Length: 43 pages
Date of creation: 23 Apr 2007
Date of revision: 08 Aug 2008
Handle: RePEc:boc:bocoec:663
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Phone: 617-552-3670
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Web page: http://fmwww.bc.edu/EC/
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  1. Edward C. Prescott, 2004. "Why do Americans Work so Much More than Europeans?," NBER Working Papers 10316, National Bureau of Economic Research, Inc.
  2. Giuseppe Nicoletti & Stefano Scarpetta, 2003. "Regulation, Productivity and Growth: OECD Evidence," OECD Economics Department Working Papers 347, OECD Publishing.
  3. Takeshi Koyama & Stephen S. Golub, 2006. "OECD's FDI Regulatory Restrictiveness Index: Revision and Extension to more Economies," OECD Working Papers on International Investment 2006/4, OECD Publishing.
  4. Daveri, Francesco & Tabellini, Guido, 1997. "Unemployment, Growth and Taxation in Industrial Countries," CEPR Discussion Papers 1681, C.E.P.R. Discussion Papers.
  5. Tito Boeri & J.Ignacio Conde-Ruiz & Vincenzo Galasso, 2003. "Protecting Against Labour Market Risk: Employment Protection or Unemployment Benefits?," Working Papers 239, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  6. Schiantarelli, Fabio, 2005. "Product Market Regulation and Macroeconomic Performance: A Review of Cross Country Evidence," IZA Discussion Papers 1791, Institute for the Study of Labor (IZA).
  7. Berger, Helge & Danninger, Stephan, 2006. "The employment effects of labor and product markets deregulations and their implications for structural reform," Discussion Papers 2006/10, Free University Berlin, School of Business & Economics.
  8. Robert J. Flanagan, 1999. "Macroeconomic Performance and Collective Bargaining: An International Perspective," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1150-1175, September.
  9. Nicholas Crafts, 2006. "Regulation and Productivity Performance," Oxford Review of Economic Policy, Oxford University Press, vol. 22(2), pages 186-202, Summer.
  10. Jens Høj & Vincenzo Galasso & Giuseppe Nicoletti & Thai-Thanh Dang, 2006. "The Political Economy of Structural Reform: Empirical Evidence from OECD Countries," OECD Economics Department Working Papers 501, OECD Publishing.
  11. Christian Haefke & Monique Ebell, 2004. "The Missing Link: Product Market Regulation, Collective Bargaining and the European Unemployment Puzzle," 2004 Meeting Papers 759, Society for Economic Dynamics.
  12. Boeri, Tito & Nicoletti, Giuseppe & Scarpetta, Stefano, 2000. "Regulation And Labour Market Performance," CEPR Discussion Papers 2420, C.E.P.R. Discussion Papers.
  13. Belot, Michèle & van Ours, Jan C, 2000. "Does the Recent Success of some OECD Countries in Lowering their Unemployment Rates lie in the Clever Design of their Labour Market Reforms?," CEPR Discussion Papers 2492, C.E.P.R. Discussion Papers.
  14. Amable, Bruno & Gatti, Donatella, 2001. "The Impact of Product Market Competition on Employment and Wages," IZA Discussion Papers 276, Institute for the Study of Labor (IZA).
  15. Giuseppe Nicoletti & Stefano Scarpetta, 2005. "Regulation and Economic Performance: Product Market Reforms and Productivity in the OECD," OECD Economics Department Working Papers 460, OECD Publishing.
  16. Monique Ebell & Christian Haefke, 2002. "Product Market Deregulation and Labor Market Outcomes," Working Papers 02.08, Swiss National Bank, Study Center Gerzensee.
  17. Stephen Nickell, 2004. "Employment and taxes," LSE Research Online Documents on Economics 19955, London School of Economics and Political Science, LSE Library.
  18. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
  19. Andrea Bassanini & Romain Duval, 2006. "Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions," OECD Economics Department Working Papers 486, OECD Publishing.
  20. Duval, Romain & Elmeskov, Jørgen, 2006. "The effects of EMU on structural reforms in labour and product markets," Working Paper Series 0596, European Central Bank.
  21. Takeshi Koyama & Stephen S. Golub, 2006. "OECD's FDI Regulatory Restrictiveness Index: Revision and Extension to more Economies," OECD Economics Department Working Papers 525, OECD Publishing.
  22. Murphy, Kevin M & Topel, Robert H, 1985. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 370-79, October.
  23. Martín Rama & Guido Tabellini, . "Lobbying by Capital and Labor over Trade and Labor Market Policies," Working Papers 94, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  24. Bruno Amable & Lilas Demmou & Donatella Gatti, 2006. "Institutions, unemployment and inactivity in the OECD countries," PSE Working Papers halshs-00590495, HAL.
  25. Messina, Julian, 2006. "The role of product market regulations in the process of structural change," European Economic Review, Elsevier, vol. 50(7), pages 1863-1890, October.
  26. Giuseppe Nicoletti & Stefano Scarpetta, 2005. "Product Market Reforms and Employment in OECD Countries," OECD Economics Department Working Papers 472, OECD Publishing.
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