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Labour Market Institutions and their Effect on Labour Market Performance in the New EU Member Countries

  • Kamila Fialová
  • Ondrej Schneider

This article focuses on the role of labour market institutions in explaining different labour market developments in European countries, with a special attention to the new European Union member countries. This may allow us to analyse effects of various institutional setups and of their changes on major labour market indicators. We aim at complementing several studies from the late 1990’s by using more recent data that allow us to compare institutional setups from the mid 1990’s and early 2000’s both in “old” and “new” EU member states. We estimate effects of labour market institutions on various performance indicators (unemployment, long-term unemployment, employment, activity rate). Our results confirm that high taxes increase unemployment, while active labour market policies tend to reduce it. We also show that stricter employment protection, higher taxes and larger economic burden represented by the minimum wage decrease employment and activity rate. Moreover, statistical tests indicate that there is a difference in the institutional effects between “old” and “new” EU members.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2421.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2421
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  1. Cahuc, P. & Michel, P., 1992. "Minimum Wage, Unemployment and Growth," Papiers d'Economie Mathématique et Applications 92.35, Université Panthéon-Sorbonne (Paris 1).
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  12. Howell David R. & Baker Dean & Glyn Andrew & Schmitt John, 2007. "Are Protective Labor Market Institutions at the Root of Unemployment? A Critical Review of the Evidence," Capitalism and Society, De Gruyter, vol. 2(1), pages 1-73, May.
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  19. Michael Lechner & Conny Wunsch, 2009. "Active labour market policy in East Germany," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(4), pages 661-702, October.
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