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Institutions in the Economic Fitness Landscape: What Impact Do Welfare State Institutions Have on Economic Performance?

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  • Schettkat, Ronald

    () (University of Wuppertal)

Abstract

This paper uses data from 20 OECD countries to investigate the impact of welfare state institutions (especially employment protection, wage bargaining and work incentives) on the functioning of the labour market both theoretically and empirically. It shows that the impact of welfare state institutions is not as clear-cut as the deregulationists' view suggests. This result may be surprising against the background of the common view that welfare state measures cause European employment problems but it is in line with the outcomes of many other economic studies. The reasons for the ambiguous effects of welfare state institutions are manifold but the most important reason is the complexity of the impacts. There are many side-effects or second-round effects of welfare state institutions which, although often neglected, prove to be very important in the real ‘imperfect market’ world. Many welfare state institutions only have a clear-cut negative effect against the background of the theoretical perfect market model.

Suggested Citation

  • Schettkat, Ronald, 2003. "Institutions in the Economic Fitness Landscape: What Impact Do Welfare State Institutions Have on Economic Performance?," IZA Discussion Papers 696, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp696
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    Cited by:

    1. Ronald Schettkat, 2003. "Institutions in the Economic Fitness Landscape: What Impact Do Welfare State Institutions Have on Economic Performance?," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(2), pages 27-33, October.
    2. Eichhorst, Werner & Feil, Michael & Braun, Christoph, 2008. "What Have We Learned? Assessing Labor Market Institutions and Indicators," IZA Discussion Papers 3470, Institute for the Study of Labor (IZA).
    3. Eckhard Hein & Achim Truger, 2005. "Macroeconomic policies, wage developments, and Germany's stagnation," IMK Working Paper 01-2005, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    4. Eckhard Hein & Achim Truger, 2005. "What ever happened to Germany? Is the decline of the former european key currency country caused by structural sclerosis or by macroeconomic mismanagement?," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(1), pages 3-28.
    5. repec:ces:ifodic:v:1:y:2003:i:2:p:14567964 is not listed on IDEAS
    6. Sarah Gammage, 2015. "Labour market institutions and gender equality," Chapters,in: Labour Markets, Institutions and Inequality, chapter 12, pages 315-339 Edward Elgar Publishing.
    7. G. Antonelli & P. P. Calia & G. Guidetti, 2014. "Approaching an investigation of multi-dimensional inequality through the lenses of variety in models of capitalism," Working Papers wp984, Dipartimento Scienze Economiche, Universita' di Bologna.
    8. Gunther Tichy, 2005. "Die ,Neue Unsicherheit: als Ursache der europäischen Wachstumsschwäche," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 6(3), pages 385-407, August.

    More about this item

    Keywords

    employment; welfare states; institutions; economic performance; growth;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • J0 - Labor and Demographic Economics - - General
    • P1 - Economic Systems - - Capitalist Systems
    • P5 - Economic Systems - - Comparative Economic Systems

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