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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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    Cited by:

    1. Miguel Á., Malo, 2017. "Labour market institutions in small Pacific island countries: Main guidelines for labour market reforms," MPRA Paper 79988, University Library of Munich, Germany.
    2. Deakin, Simon., 2013. "Addressing labour market segmentation : the role of labour law," ILO Working Papers 994834483402676, International Labour Organization.
    3. 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.
    4. Frick, Bernd & Malo, Miguel A. & Garcia Martinez, Pilar & Schneider, Martin, 2012. "The Demand for Individual Grievance Procedures in Germany and Spain: Labour Law Changes versus Business Cycle/La demanda de reclamaciones laborales individuales en Alemania y España: Derecho Laboral v," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 30, pages 283-310, Abril.
    5. Simon Deakin, 2008. "Legal Origin, Juridical Form and Industrialisation in Historical Perspective: The Case of the Employment Contract and the Joint-Stock Company," Working Papers wp369, Centre for Business Research, University of Cambridge.
    6. Simon Deakin & Antara Haldar, 2015. "How Should India Reforms Its Labour Laws?," Working Papers wp469, Centre for Business Research, University of Cambridge.
    7. Anastasia Koutsomanoli-Filippaki & Emmanuel Mamatzakis, 2013. "How labour market regulation shapes bank performance in EU-15 countries?," Working Papers 162, Bank of Greece.
    8. Armour, J. & Deakin, S. & Mollica, V. & Siems, M.M., 2010. "Law and Financial Development: What we are learning from time-series evidence," Working Papers wp399, Centre for Business Research, University of Cambridge.
    9. Deakin, Simon & Sarkar, Prabirjit & Singh, Ajit, 2010. "An End to Consensus? The (Non) Impact of Legal Reforms on Financial Development," MPRA Paper 53352, University Library of Munich, Germany.
    10. Simon Deakin, 2013. "The Legal Framework Governing Business Firms & its Implications for Manufacturing Scale & Performance: The UK Experience in International Perspective," Working Papers wp449, Centre for Business Research, University of Cambridge.
    11. Deakin, S. & Sarkar, P., 2011. "Indian Labour Law and its Impact on Unemployment, 1970-2006: A leximetric study," Working Papers wp428, Centre for Business Research, University of Cambridge.
    12. Simon Deakin, 2016. "The Contribution of Labour Law to Economic Development & Growth," Working Papers wp478, Centre for Business Research, University of Cambridge.
    13. Rupert Harwood, 2016. "What Has Limited the Impact of UK Disability Equality Law on Social Justice?," Laws, MDPI, Open Access Journal, vol. 5(4), pages 1-23, November.
    14. Simon Deakin, 2013. "Addressing Labour Market Segmentation: The Role of Labour Law," Working Papers wp446, Centre for Business Research, University of Cambridge.
    15. John Armour & Simon Deakin & Priya Lele & Mathias Siems, 2009. "How Do Legal Rules Evolve? Evidence from a cross-country Comparison of Shareholder, Creditor and Worker Protection," Working Papers wp382, Centre for Business Research, University of Cambridge.
    16. Jean-Claude Barbier & Fabrice Colomb, 2015. "The Janus face of EU law: A sociological perspective on European law making and its influence on social policy in the EU," Chapters,in: The Sustainability of the European Social Model, chapter 1, pages 19-43 Edward Elgar Publishing.
    17. Sarkar, Prabirjit, 2011. "Does employment protection lead to unemployment? A panel data analysis of OECD countries, 1990-2008," MPRA Paper 35547, University Library of Munich, Germany.
    18. repec:bla:indrel:v:48:y:2017:i:1:p:72-93 is not listed on IDEAS
    19. Wolfgang Ochel, 2009. "Employment Protection: Concepts and Measurement," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 7(2), pages 30-38, 07.
    20. John Buchanan & Dominic Heesang Chai & Simon Deakin, 2013. "Empirical Analysis of Legal Institutions and Institutional Change: Multiple-Methods Approaches and their Application to Corporate Governance Research," Working Papers wp445, Centre for Business Research, University of Cambridge.
    21. Mathias Siems, 2009. "Shareholder, Creditor and Worker Protection: Time Series Evidence about the Differences between French, German, Idian, UK and US Law," Working Papers wp381, Centre for Business Research, University of Cambridge.
    22. 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.
    23. repec:ilo:ilowps:483448 is not listed on IDEAS
    24. Simon Deakin, 2018. "The Use of Quantitative Methods in Labour Law Research: An Assessment and Reformulation," Working Papers wp495, Centre for Business Research, University of Cambridge.
    25. Simon Deakin, 2008. "Legal Origin, Juridical Form and Industrialisation in Historical Perspective: The Case of the Employment Contract and the Joint-Stock Company," WEF Working Papers 0042, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.

    More about this item

    Keywords

    labour law; employment; productivity; redistribution; complementarities; legal origins; varieties of capitalism;

    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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