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Labour market institutions in Hungary with a focus on wage and employment flexibility

Author

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  • Hedvig Horváth

    (Central European University)

  • Zoltán Szalai

    (Magyar Nemzeti Bank)

Abstract

It is widely believed today, that the operation of the labour markets is influenced by institutional factors, affecting macroeconomic adjustment in response to shocks. In this way, labour market institutions affect both cyclical and long-term growth and inflation performance of an economy. The aim of our paper is to review the operation of Hungarian labour market institutions from the point of view of labour market flexibility and find its place in international comparison in the light of existing stock of knowledge on the subject. We describe the institutional setup of the labour markets through seven dimensions (unemployment generosity, tax wedge, active labour market policies, employment protection legislation, product market regulation, union density and coverage and wage bargaining institutions) for which internationally comparable data are available. We conclude that the Hungarian labour market institutions are rather flexible in EU-comparison. However, tax wedge is high and the active labour market policies still perform poorly, both contributing to weak employment.

Suggested Citation

  • Hedvig Horváth & Zoltán Szalai, 2008. "Labour market institutions in Hungary with a focus on wage and employment flexibility," MNB Occasional Papers 2008/77, Magyar Nemzeti Bank (Central Bank of Hungary).
    • Handle: RePEc:mnb:opaper:2008/77
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    Cited by:

    1. de Ferra, Sergio & Mitman, Kurt & Romei, Federica, 2020. "Household heterogeneity and the transmission of foreign shocks," Journal of International Economics, Elsevier, vol. 124(C).
    2. Gábor Kátay, 2011. "Downward wage rigidity in Hungary," MNB Working Papers 2011/9, Magyar Nemzeti Bank (Central Bank of Hungary).
    3. Dubravko Mihaljek & Sweta Saxena, 2010. "Wages, productivity and "structural" inflation in emerging market economies," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy and the measurement of inflation: prices, wages and expectations, volume 49, pages 53-75, Bank for International Settlements.
    4. M. Kopasz & Z. Fábián & András Gábos & Márton Medgyesi & P. Szivós & István György Tóth, 2013. "GINI Country Report: Growing Inequalities and their Impacts in Hungary," GINI Country Reports hungary, AIAS, Amsterdam Institute for Advanced Labour Studies.

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    More about this item

    Keywords

    wage flexibility; unemployment; labour market institutions; product market regulation; policy complementarity.;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation

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