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Labor Market Institutions Around the World

  • Richard B. Freeman

The paper documents the large cross-country differences in labor institutions that make them a candidate explanatory factor for the divergent economic performance of countries and reviews what economists have learned about the effects of these institutions on economic outcomes. It identifies three ways in which institutions affect economic performance: by altering incentives, by facilitating efficient bargaining, and by increasing information, communication, and trust. The evidence shows that labor institutions reduce the dispersion of earnings and income inequality, which alters incentives, but finds equivocal effects on other aggregate outcomes, such as employment and unemployment. Given weaknesses in the cross-country data on which most studies focus, the paper argues for increased use of micro-data, simulations, and experiments to illuminate how labor institutions operate and affect outcomes.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13242.

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Date of creation: Jul 2007
Date of revision:
Publication status: published as Pub. date: 2008 | Online Pub. Date: October 01, 2010 | DOI: | Print ISBN: 9781412911542 | Online ISBN: 9781849200431 | Publisher:SAGE Publications Ltd
Handle: RePEc:nbr:nberwo:13242
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  1. Holmlund, Bertil & Zetterberg, Johnny, 1991. "Insider effects in wage determination : Evidence from five countries," European Economic Review, Elsevier, vol. 35(5), pages 1009-1034, July.
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  5. Ljungqvist, Lars & Sargent, Thomas J., 1997. "The European Unemployment Dilemma," Working Paper Series 481, Research Institute of Industrial Economics.
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  7. Nickell, Stephen & Bell, Brian, 1996. "Changes in the Distribution of Wages and Unemployment in OECD Countries," American Economic Review, American Economic Association, vol. 86(2), pages 302-08, May.
  8. Teulings,Coen & Hartog,Joop, 1998. "Corporatism or Competition?," Cambridge Books, Cambridge University Press, number 9780521590730, September.
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  10. Leigh Tesfatsion & Mark Pingle, 2003. "Evolution of Worker-Employer Networks and Behaviors Under Alternative Non-Employment Benefits: An Agent-Based Computational Study," Computing in Economics and Finance 2003 7, Society for Computational Economics.
  11. Richard B. Freeman, 2007. "Searching for the EU Social Dialogue Model," AIEL Series in Labour Economics, in: Nicola Acocella & Riccardo Leoni (ed.), Social Pacts, Employment and Growth. A Reappraisal of Ezio Tarantelli’s Thought, edition 1, chapter 11, pages 221-238 AIEL - Associazione Italiana Economisti del Lavoro.
  12. Jackson, Matthew O., 1999. "A Crash Course in Implementation Theory," Working Papers 1076, California Institute of Technology, Division of the Humanities and Social Sciences.
  13. David R. Howell & Dean Baker & Andrew Glyn & John Schmitt, 2006. "Are Protective Labor Market Institutions Really at the Root of Unemployment? A Critical Perspective on the Statistical Evidence," CEPR Reports and Issue Briefs 2006-14, Center for Economic and Policy Research (CEPR).
  14. Stephen Nickell & Luca Nunziata & Wolfgang Ochel, 2005. "Unemployment in the OECD Since the 1960s. What Do We Know?," Economic Journal, Royal Economic Society, vol. 115(500), pages 1-27, 01.
  15. Alan Manning, 2010. "Imperfect competition in the labour market," LSE Research Online Documents on Economics 28729, London School of Economics and Political Science, LSE Library.
  16. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, June.
  17. Richard Freeman, 2005. "Labour market institutions without blinders: The debate over flexibility and labour market performance," International Economic Journal, Taylor & Francis Journals, vol. 19(2), pages 129-145.
  18. Davin Chor & Richard B. Freeman, 2005. "The 2004 Global Labor Survey : Workplace Institutions and Practices Around the World," Labor Economics Working Papers 22066, East Asian Bureau of Economic Research.
  19. Blanchflower, David G., 2001. "Unemployment, Well-Being, and Wage Curves in Eastern and Central Europe," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 364-402, December.
  20. Freeman, Richard Barry, 1984. "Longitudinal Analyses of the Effects of Trade Unions," Scholarly Articles 4631951, Harvard University Department of Economics.
  21. Elliott Peranson & Alvin E. Roth, 1999. "The Redesign of the Matching Market for American Physicians: Some Engineering Aspects of Economic Design," American Economic Review, American Economic Association, vol. 89(4), pages 748-780, September.
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  25. Pedro Telhado Pereira & Pedro Silva Martins, 2004. "Returns to education and wage equations," Applied Economics, Taylor & Francis Journals, vol. 36(6), pages 525-531.
  26. Alberto Abadie & Alexis Diamond & Jens Hainmueller, 2007. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California's Tobacco Control Program," NBER Working Papers 12831, National Bureau of Economic Research, Inc.
  27. repec:ucp:bknber:9780226723761 is not listed on IDEAS
  28. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
  29. Michael Bruno & Jeffrey D. Sachs, 1985. "Economics of Worldwide Stagflation," NBER Books, National Bureau of Economic Research, Inc, number brun85-1, June.
  30. Michael Neugart, 2004. "Endogenous Matching Functions: An Agent-Based Computational Approach," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 7(02), pages 187-201.
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  34. Freeman, Richard B, 1993. "Labor Markets and Institutions in Economic Development," American Economic Review, American Economic Association, vol. 83(2), pages 403-08, May.
  35. Marco Manacorda, 2004. "Can the Scala Mobile Explain the Fall and Rise of Earnings Inequality in Italy? A Semiparametric Analysis, 19771993," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 585-614, July.
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