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Assessing the Long-Run Economic Impact of Labour Law Systems: A theoretical Reappraisal and Analysis of New Time Series Data

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  • Simon Deakin
  • Prabirjit Sarkar

Abstract

Standard economic theory sees labour law as an exogenous interference with market relations and predicts mostly negative impacts on employment and productivity. We argue for a more nuanced theoretical position: labour law is, at least in part, endogenous, with both the production and the application of labour law norms influenced by national and sectoral contexts, and by complementarities between the institutions of the labour market and those of corporate governance and financial markets. Legal origin may also operate as a force shaping the content of the law and its economic impact. Time-series analysis using a new dataset on legal change from the 1970s to the mid-2000s shows evidence of positive correlations between regulation and growth in employment and productivity, at least for France and Germany. No relationship, either positive or negative, is found for the UK, and although the US shows a weak negative relationship between regulation and employment growth, this is offset by productivity gains.

Suggested Citation

  • Simon Deakin & Prabirjit Sarkar, 2008. "Assessing the Long-Run Economic Impact of Labour Law Systems: A theoretical Reappraisal and Analysis of New Time Series Data," Working Papers wp367, Centre for Business Research, University of Cambridge.
  • Handle: RePEc:cbr:cbrwps:wp367
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    More about this item

    Keywords

    labour law; employment; productivity; redistribution; complementarities; legal origins; varieties of capitalism;
    All these keywords.

    JEL classification:

    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • J83 - Labor and Demographic Economics - - Labor Standards - - - Workers' Rights

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