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Reforming Labor and Product Markets; Some Lessons from Two Decades of Experiments in Europe

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  • Tito Boeri

Abstract

This paper evaluates European structural reforms over the last 20 years, in light of economic theory predictions about interactions between labor and product market reforms. Reforms in labor markets occur at higher frequencies than in product market, which are, however, more coherent. These asymmetries can be explained by the nature of political obstacles to reforms in the two domains. Labor market reforms can exploit institutional trade-offs; notably, reforms can trade labor market flexibility with state-provided unemployment insurance and can be applied only to new entrants in the market without affecting the set of regulations applied to existing workers. These two-tier strategies are infeasible in product markets, since incumbent firms can easily drive away new entrants. In product markets, however, it is possible to shift responsibilities to supranational authorities, resisting pressures of national lobbies.

Suggested Citation

  • Tito Boeri, 2005. "Reforming Labor and Product Markets; Some Lessons from Two Decades of Experiments in Europe," IMF Working Papers 05/97, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:05/97
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    References listed on IDEAS

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    1. Tito Boeri & J. Ignacio Conde-Ruiz & Vincenzo Galasso, "undated". "Protecting Against Labour Market Risk: Employment Protection or Unemployment Benefits?," Working Papers 2003-17, FEDEA.
    2. Giuseppe Nicoletti & Stefano Scarpetta & Olivier Boylaud, 2000. "Summary Indicators of Product Market Regulation with an Extension to Employment Protection Legislation," OECD Economics Department Working Papers 226, OECD Publishing.
    3. Boeri, Tito & Jimeno, Juan F., 2005. "The effects of employment protection: Learning from variable enforcement," European Economic Review, Elsevier, vol. 49(8), pages 2057-2077, November.
    4. Daron Acemoglu & Robert Shimer, 1999. "Efficient Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 893-928, October.
    5. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 118(3), pages 879-907.
    6. 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.
    7. Juan J Dolado & Carlos Garcia--Serrano & Juan F. Jimeno, 2002. "Drawing Lessons From The Boom Of Temporary Jobs In Spain," Economic Journal, Royal Economic Society, vol. 112(721), pages 270-295, June.
    8. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 279-298.
    9. Saint-Paul, Gilles, 2000. "The Political Economy of Labour Market Institutions," OUP Catalogue, Oxford University Press, number 9780198293323.
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    Cited by:

    1. Kamila Fialová & OndÅej Schneider, 2009. "Labor Market Institutions and Their Effect on Labor Market Performance in the New EU Member Countries," Eastern European Economics, Taylor & Francis Journals, vol. 47(3), pages 57-83, May.
    2. 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.
    3. Alberto Alesina & Silvia Ardagna & Francesco Trebbi, 2006. "Who Adjusts and When? On the Political Economy of Reforms," NBER Working Papers 12049, National Bureau of Economic Research, Inc.
    4. Maria da Conceição Cerdeira & Ilona Kovács, 2008. "Job quality in Europe: the North-South divide," Enterprise and Work Innovation Studies, Universidade Nova de Lisboa, IET/CICS.NOVA-Interdisciplinary Centre on Social Sciences, Faculty of Science and Technology, vol. 4(4), pages 21-47, November.

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