IDEAS home Printed from https://ideas.repec.org/p/ctc/serie1/def013.html
   My bibliography  Save this paper

Policy Myopia and Labour Market Institutions

Author

Listed:
  • Claudio Lucifora

    (Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore)

  • Simone Moriconi

    (Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore)

Abstract

In the public debate, poor employment performance has often been associated with the existence of extensive labour market regulations and a lack of commitment to far- sighted public policies. This paper investigates the relation between policy myopia and labour market institutions. We develop a theoretical model in which policy myopia leads an incumbent government to choose institutions that allow the creation of rents in the labour market and reduce resources available to public goods provision and social expenditure. We test these predictions empirically using panel data for 21 OECD countries for the period 1985{2006. We show that policy myopia is associated with more regulated labour markets, lower unemployment bene t replacement rates, and smaller tax wedges on labour.

Suggested Citation

  • Claudio Lucifora & Simone Moriconi, 2014. "Policy Myopia and Labour Market Institutions," DISCE - Working Papers del Dipartimento di Economia e Finanza def013, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    • Handle: RePEc:ctc:serie1:def013
    as

    Download full text from publisher

    File URL: http://dipartimenti.unicatt.it/economia-finanza-def013.pdf
    File Function: First version, 2014
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. David T. Coe & Dennis J. Snower, 1997. "Policy Complementarities: The Case for Fundamental Labor Market Reform," IMF Staff Papers, Palgrave Macmillan, vol. 44(1), pages 1-35, March.
    2. Torsten Persson & Guido Tabellini, 2004. "Constitutions and Economic Policy," Journal of Economic Perspectives, American Economic Association, vol. 18(1), pages 75-98, Winter.
    3. Alfonso Arpaia & Gilles Mourre, 2012. "Institutions And Performance In European Labour Markets: Taking A Fresh Look At Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 26(1), pages 1-41, February.
    4. M. Hashem Pesaran, 2006. "Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure," Econometrica, Econometric Society, vol. 74(4), pages 967-1012, July.
    5. Torsten Persson & Gerard Roland & Guido Tabellini, 2000. "Comparative Politics and Public Finance," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1121-1161, December.
    6. Torsten Persson & Gérard Roland & Guido Tabellini, 1997. "Separation of Powers and Political Accountability," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1163-1202.
    7. Timothy Besley & Torsten Persson, 2009. "The Origins of State Capacity: Property Rights, Taxation, and Politics," American Economic Review, American Economic Association, vol. 99(4), pages 1218-1244, September.
    8. Luca Nunziata, 2005. "Institutions and Wage Determination: a Multi‐country Approach," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(4), pages 435-466, August.
    9. Edward L. Glaeser & Andrei Shleifer, 2002. "Legal Origins," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1193-1229.
    10. Rachel Griffith & Rupert Harrison & Gareth Macartney, 2007. "Product Market Reforms, Labour Market Institutions and Unemployment," Economic Journal, Royal Economic Society, vol. 117(519), pages 142-166, March.
    11. Torsten Persson & Lars E. O. Svensson, 1989. "Why a Stubborn Conservative would Run a Deficit: Policy with Time-Inconsistent Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(2), pages 325-345.
    12. Juan C. Botero & Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "The Regulation of Labor," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(4), pages 1339-1382.
    13. Tito Boeri & J. Ignacio Conde-Ruiz & Vincenzo Galasso, 2012. "The Political Economy Of Flexicurity," Journal of the European Economic Association, European Economic Association, vol. 10(4), pages 684-715, August.
    14. Stefania Fabrizio & Ashoka Mody, 2006. "Can budget institutions counteract political indiscipline? [‘Constitutions, politics, and economics’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 21(48), pages 690-739.
    15. Leblanc, William & Snyder, James Jr. & Tripathi, Micky, 2000. "Majority-rule bargaining and the under provision of public investment goods," Journal of Public Economics, Elsevier, vol. 75(1), pages 21-47, January.
    16. Svensson, Jakob, 1998. "Investment, property rights and political instability: Theory and evidence," European Economic Review, Elsevier, vol. 42(7), pages 1317-1341, July.
    17. Blanchard, Olivier J. & Summers, Lawrence H., 1987. "Hysteresis in unemployment," European Economic Review, Elsevier, vol. 31(1-2), pages 288-295.
    18. Marina Azzimonti, 2011. "Barriers to Investment in Polarized Societies," American Economic Review, American Economic Association, vol. 101(5), pages 2182-2204, August.
    19. Ernesto Dal Bó & Martín A. Rossi, 2011. "Term Length and the Effort of Politicians," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(4), pages 1237-1263.
    20. Mr. Ashoka Mody & Ms. Stefania Fabrizio, 2006. "Can Budget Institutions Counteract Political Indiscipline?," IMF Working Papers 2006/123, International Monetary Fund.
    21. Andrea Bassanini & Romain Duval, 2009. "Unemployment, institutions, and reform complementarities: re-assessing the aggregate evidence for OECD countries," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 25(1), pages 40-59, Spring.
    22. Wright, Randall, 1986. "The redistributive roles of unemployment insurance and the dynamics of voting," Journal of Public Economics, Elsevier, vol. 31(3), pages 377-399, December.
    23. Aidt, T.S. & Dutta, Jayasri & Loukoianova, Elena, 2006. "Democracy comes to Europe: Franchise extension and fiscal outcomes 1830-1938," European Economic Review, Elsevier, vol. 50(2), pages 249-283, February.
    24. Tsebelis, George, 1995. "Decision Making in Political Systems: Veto Players in Presidentialism, Parliamentarism, Multicameralism and Multipartyism," British Journal of Political Science, Cambridge University Press, vol. 25(3), pages 289-325, July.
    25. Daron Acemoglu, 2006. "A Simple Model of Inefficient Institutions," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(4), pages 515-546, December.
    26. Stern, Nicholas, 1987. "The effects of taxation, price control and government contracts in oligopoly and monopolistic competition," Journal of Public Economics, Elsevier, vol. 32(2), pages 133-158, March.
    27. Duval, Romain, 2008. "Is there a role for macroeconomic policy in fostering structural reforms? Panel evidence from OECD countries over the past two decades," European Journal of Political Economy, Elsevier, vol. 24(2), pages 491-502, June.
    28. Aidt, Toke S. & Dutta, Jayasri, 2007. "Policy myopia and economic growth," European Journal of Political Economy, Elsevier, vol. 23(3), pages 734-753, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lucifora, Claudio & Moriconi, Simone, 2015. "Political instability and labour market institutions," European Journal of Political Economy, Elsevier, vol. 39(C), pages 201-221.
    2. repec:ctc:serie1:def13 is not listed on IDEAS
    3. Etienne Lehmann & Claudio Lucifora & Simone Moriconi & Bruno Van der Linden, 2016. "Beyond the labour income tax wedge: the unemployment-reducing effect of tax progressivity," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(3), pages 454-489, June.
    4. Buchen, Clemens, 2010. "Emerging economic systems in Central and Eastern Europe – a qualitative and quantitative assessment," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 37141.
    5. Olper, Alessandro & Raimondi, Valentina, 2008. "Consitutional Rules and Agricultural Policy Outcomes," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43870, European Association of Agricultural Economists.
    6. Andersen, Jørgen Juel, 2011. "The form of government and fiscal dynamics," European Journal of Political Economy, Elsevier, vol. 27(2), pages 297-310, June.
    7. Niklas Potrafke, 2010. "Labor market deregulation and globalization: empirical evidence from OECD countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 146(3), pages 545-571, September.
    8. Aidt, Toke S. & Dutta, Jayasri, 2007. "Policy myopia and economic growth," European Journal of Political Economy, Elsevier, vol. 23(3), pages 734-753, September.
    9. Auerbach, Jan U., 2021. "Political competition over property rights enforcement," European Economic Review, Elsevier, vol. 131(C).
    10. Persson, Torsten & Tabellini, Guido, 2002. "Political economics and public finance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 24, pages 1549-1659, Elsevier.
    11. Pablo T. Spiller, 2003. "The Institutional Foundations of Public Policy: A Transactions Approach with Application to Argentina," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 19(2), pages 281-306, October.
    12. Gilles Saint‐Paul & Davide Ticchi & Andrea Vindigni, 2016. "A Theory of Political Entrenchment," Economic Journal, Royal Economic Society, vol. 126(593), pages 1238-1263, June.
    13. Badinger, Harald & Reuter, Wolf Heinrich, 2017. "The case for fiscal rules," Economic Modelling, Elsevier, vol. 60(C), pages 334-343.
    14. Ech-charfi, Nour-eddine, 2024. "Fiscal rules, capital controls, and cross-border financial integration," European Journal of Political Economy, Elsevier, vol. 85(C).
    15. Alvaro Forteza & Juan S. Pereyra, 2021. "Separation of powers with ideological parties," Journal of Theoretical Politics, , vol. 33(3), pages 333-382, July.
    16. Casey B. Mulligan & Ricard Gil & Xavier Sala-i-Martin, 2004. "Do Democracies Have Different Public Policies than Nondemocracies?," Journal of Economic Perspectives, American Economic Association, vol. 18(1), pages 51-74, Winter.
    17. Millner, Antony & Ollivier, Hélène & Simon, Leo, 2014. "Policy experimentation, political competition, and heterogeneous beliefs," Journal of Public Economics, Elsevier, vol. 120(C), pages 84-96.
    18. Céline Piton, 2022. "The labour market performance of vulnerable groups: towards a better understanding of the main driving forces," ULB Institutional Repository 2013/352519, ULB -- Universite Libre de Bruxelles.
    19. Caruso, Germán & Scartascini, Carlos & Tommasi, Mariano, 2015. "Are we all playing the same game? The economic effects of constitutions depend on the degree of institutionalization," European Journal of Political Economy, Elsevier, vol. 38(C), pages 212-228.
    20. James B. Ang & Per G. Fredriksson, 2017. "Statehood Experience, Legal Traditions, And Climate Change Policies," Economic Inquiry, Western Economic Association International, vol. 55(3), pages 1511-1537, July.
    21. Stefan Voigt, 2011. "Positive constitutional economics II—a survey of recent developments," Public Choice, Springer, vol. 146(1), pages 205-256, January.

    More about this item

    Keywords

    Policy myopia; public good provision; labour market institutions;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J88 - Labor and Demographic Economics - - Labor Standards - - - Public Policy
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ctc:serie1:def013. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Simone Moriconi The email address of this maintainer does not seem to be valid anymore. Please ask Simone Moriconi to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/dscatit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.