IDEAS home Printed from https://ideas.repec.org/p/zbw/fubsbe/200610.html
   My bibliography  Save this paper

The employment effects of labor and product markets deregulations and their implications for structural reform

Author

Listed:
  • Berger, Helge
  • Danninger, Stephan

Abstract

This study explores the effects of market deregulation on employment growth. Empirical analysis of an OECD country panel (1990-2004) suggests that lower levels of product and labor market regulation foster employment growth, including through sizable interaction effects. A theoretical framework is developed for evaluating deregulation strategies in the presence of reform costs. Optimal deregulation takes various forms depending on the deregulation costs and the strength of reform interactions. Compared to the first best, decentralized decision-making can lead to excessive or insufficient deregulation. Securing the first best requires coordinating deregulation activities across sectors and overcoming the partial perspective of decision makers.

Suggested Citation

  • Berger, Helge & Danninger, Stephan, 2006. "The employment effects of labor and product markets deregulations and their implications for structural reform," Discussion Papers 2006/10, Free University Berlin, School of Business & Economics.
    • Handle: RePEc:zbw:fubsbe:200610
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/28036/1/517662604.PDF
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Paul Conway & Véronique Janod & Giuseppe Nicoletti, 2005. "Product Market Regulation in OECD Countries: 1998 to 2003," OECD Economics Department Working Papers 419, OECD Publishing.
    2. Tito Boeri & Giuseppe Nicoletti & Stefano Scarpetta, "undated". "Regulation and Labour Market Performance," Working Papers 158, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    3. 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.
    4. Adriana D. Kugler & Giovanni Pica, 2006. "The Effects of Employment Protection and Product Market Regulations on the Italian Labour Market," Chapters, in: Julián Messina & Claudio Michelacci & Jarkko Turunen & Gylfi Zoega (ed.), Labour Market Adjustments in Europe, chapter 4, Edward Elgar Publishing.
    5. 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.
    6. Layard, R. & Nickell, S., 1991. "Unemployment in the OECD Countries," Economics Series Working Papers 99130, University of Oxford, Department of Economics.
    7. Stephen Nickell, 2003. "Labour Market Institutions and Unemployment in OECD Countries," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(2), pages 13-26, October.
    8. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
    9. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(3), pages 879-907.
    10. Dewatripont, Mathias & Roland, Gerard, 1995. "The Design of Reform Packages under Uncertainty," American Economic Review, American Economic Association, vol. 85(5), pages 1207-1223, December.
    11. Bertola, Giuseppe & Blau, Francine D & Kahn, Lawrence, 2001. "Comparative Analysis of Labour Market Outcomes: Lessons for the US from International Long-Run Evidence," CEPR Discussion Papers 3023, C.E.P.R. Discussion Papers.
    12. Hallett, Andrew Hughes & Jensen, Svend E. Hougaard & Richter, Christian, 2005. "The European economy at the cross roads: Structural reforms, fiscal constraints, and the Lisbon Agenda," Research in International Business and Finance, Elsevier, vol. 19(2), pages 229-250, June.
    13. Lawrence Kahn, 2003. "Labour Market Institutions and Unemployment in OECD Countries," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(4), pages 25-32, October.
    14. Monique Ebell & Christian Haefke, 2002. "Product Market Deregulation and Labor Market Outcomes," Working Papers 02.08, Swiss National Bank, Study Center Gerzensee.
    15. repec:ces:ifodic:v:1:y:2003:i:2:p:14567946 is not listed on IDEAS
    16. 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, January.
    17. Alfonso Arpaia & Gilles Mourre, 2005. "Labour market institutions and labour market performance: A survey of the literature," European Economy - Economic Papers 2008 - 2015 238, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    18. Alberto Alesina & Silvia Ardagna & Giuseppe Nicoletti & Fabio Schiantarelli, 2005. "Regulation And Investment," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 791-825, June.
    19. Alan B. Krueger & Jorn-Steffen Pischke, 1997. "Observations and Conjectures on the U.S. Employment Miracle," NBER Working Papers 6146, National Bureau of Economic Research, Inc.
    20. Giuseppe Nicoletti & Stefano Scarpetta, 2005. "Product Market Reforms and Employment in OECD Countries," OECD Economics Department Working Papers 472, OECD Publishing.
    21. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 15(30), pages 48-104.
    22. Potters, J.J.M. & van Winden, F.A.A.M., 1996. "Models of interest groups : Four different approaches," Other publications TiSEM 989c7739-9342-4fdc-82ee-e, Tilburg University, School of Economics and Management.
    23. Winston, Clifford, 1993. "Economic Deregulation: Days of Reckoning for Microeconomists," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1263-1289, September.
    24. Giuseppe Nicoletti & Stefano Scarpetta, 2003. "Regulation, productivity and growth: OECD evidence [‘A model of growth through creative destruction’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 18(36), pages 9-72.
    25. Julián Messina, 2005. "Institutions and Service Employment: A Panel Study for OECD Countries," LABOUR, CEIS, vol. 19(2), pages 343-372, June.
    26. Stephen Morris & Stephen Coate, 1999. "Policy Persistence," American Economic Review, American Economic Association, vol. 89(5), pages 1327-1336, December.
    27. Koeniger, Winfried & Vindigni, Andrea, 2003. "Employment Protection and Product Market Regulation," IZA Discussion Papers 880, Institute of Labor Economics (IZA).
    28. International Monetary Fund, 2004. "Euro Area Policies: Selected Issues," IMF Staff Country Reports 2004/235, International Monetary Fund.
    29. repec:zbw:rwidps:0013 is not listed on IDEAS
    30. Bruno Amable & Donatella Gatti, 2004. "Product market competition, job security, and aggregate employment," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 667-686, October.
    31. Fertig, Michael & Kluve, Jochen, 2004. "A Conceptual Framework for the Evaluation of Comprehensive Labor Market Policy Reforms in Germany," IZA Discussion Papers 1099, Institute of Labor Economics (IZA).
    32. Stephen Nickell, 2003. "Labour Market Institutions and Unemployment in OECD Countries," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(02), pages 13-26, October.
    33. Christian Haefke & Monique Ebell, 2004. "The Missing Link: Product Market Regulation, Collective Bargaining and the European Unemployment Puzzle," 2004 Meeting Papers 759, Society for Economic Dynamics.
    34. Heikki Kauppi & Erkki Koskela & Rune Stenbacka, 2004. "Equilibrium Unemployment and Capital Intensity Under Product and Labor Market Imperfections," CESifo Working Paper Series 1343, CESifo.
    35. Michael Burda, 2000. "Product market regulation and labour market outcomes : how can deregulation create jobs ; the European unemployment problem," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(01), pages 15-16, October.
    36. Olivier Blanchard, 2004. "The Economic Future of Europe," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 3-26, Fall.
    37. Sam Peltzman, 1989. "The Economic Theory of Regulation after a Decade of Deregulation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1989 Micr), pages 1-59.
    38. repec:reg:rpubli:74 is not listed on IDEAS
    39. Sébastien Jean & Giuseppe Nicoletti, 2004. "Regulation and Wage Premia," Working Papers 2004-12, CEPII research center.
    40. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-1155, December.
    41. Michael Burda, 2000. "Product Market Regulation and Labor Market Outcomes: How can Deregulation Create Jobs?," CESifo Working Paper Series 230, CESifo.
    42. Mr. Helge Berger & Mr. Stephan Danninger, 2005. "Labor and Product Market Deregulation: Partial, Sequential, or Simultaneous Reform?," IMF Working Papers 2005/227, International Monetary Fund.
    43. Boss, Alfred & Elendner, Thomas, 2005. "Incentives to work: The case of Germany," Kiel Working Papers 1237, Kiel Institute for the World Economy (IfW Kiel).
    44. Peltzman, Sam, 1976. "Toward a More General Theory of Regulation," Journal of Law and Economics, University of Chicago Press, vol. 19(2), pages 211-240, August.
    45. International Monetary Fund, 2004. "Euro Area Policies," IMF Staff Country Reports 2004/234, International Monetary Fund.
    46. Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(3), pages 371-400.
    47. Mr. Marcello M. Estevão, 2005. "Product Market Regulation and the Benefits of Wage Moderation," IMF Working Papers 2005/191, International Monetary Fund.
    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. Mr. Helge Berger & Mr. Stephan Danninger, 2005. "Labor and Product Market Deregulation: Partial, Sequential, or Simultaneous Reform?," IMF Working Papers 2005/227, International Monetary Fund.
    2. H Buscher & C Dreger & R Ramos & J Surinach, 2009. "The Impact of Institutions on the Employment Performance in European Labour Markets," Economic Issues Journal Articles, Economic Issues, vol. 14(1), pages 17-34, March.
    3. Christian Dreger & Manuel Artís & Rosina Moreno & Raúl Ramos & Jordi Suriñach, 2007. "Study on the feasibility of a tool to measure the macroeconomic impact of structural reforms," European Economy - Economic Papers 2008 - 2015 272, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    4. Feldmann, Horst, 2009. "Business regulation, labor force participation and employment in industrial countries," Journal of Economics and Business, Elsevier, vol. 61(3), pages 238-260.
    5. Sebastian Weber, 2006. "Labor Market Structures, Trade and their Effect on Unemployment: A Theoretical Analysis and Empirical Investigation," IHEID Working Papers 22-2006, Economics Section, The Graduate Institute of International Studies.
    6. Silvia Fedeli & Vitantonio Mariella & Marco Onofri, 2018. "Determinants of Joblessness During the Economic Crisis: Impact of Criminality in the Italian Labour Market," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 139(2), pages 559-588, September.
    7. Andrea Bassanini & Romain Duval, 2006. "The Determinants of Unemployment across OECD Countries," Post-Print halshs-00120584, HAL.
    8. Jo Seldeslachts, 2002. "Interactions Between Product and Labour Market Reforms," UFAE and IAE Working Papers 519.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    9. Campos, Nauro F. & De Grauwe, Paul & Ji, Yuemei, 2023. "Structural reforms and economic performance: the experience of advanced economies," LSE Research Online Documents on Economics 120870, London School of Economics and Political Science, LSE Library.
    10. Donatella Gatti & Christophe Rault & Anne-Gael Vaubourg, 2012. "Unemployment and finance: how do financial and labour market factors interact?," Oxford Economic Papers, Oxford University Press, vol. 64(3), pages 464-489, July.
    11. Bruno Amable & Lilas Demmou & Donatella Gatti, 2007. "Employment Performance and Institutions: New Answers to an Old Question," Working Papers hal-04021096, HAL.
    12. Adriana D. Kugler & Giovanni Pica, 2006. "The Effects of Employment Protection and Product Market Regulations on the Italian Labour Market," Chapters, in: Julián Messina & Claudio Michelacci & Jarkko Turunen & Gylfi Zoega (ed.), Labour Market Adjustments in Europe, chapter 4, Edward Elgar Publishing.
    13. Ron Smith & Gylfi Zoega, 2004. "Global Shocks and Unemployment Adjustment," Economics wp24_smith, Department of Economics, Central bank of Iceland.
    14. Brand, Claus & Obstbaum, Meri & Coenen, Günter & Sondermann, David & Lydon, Reamonn & Ajevskis, Viktors & Hammermann, Felix & Angino, Siria & Hernborg, Nils & Basso, Henrique & Hertweck, Matthias & Bi, 2021. "Employment and the conduct of monetary policy in the euro area," Occasional Paper Series 275, European Central Bank.
    15. Eichhorst, Werner & Feil, Michael & Braun, Christoph, 2008. "What Have We Learned? Assessing Labor Market Institutions and Indicators," IZA Discussion Papers 3470, Institute of Labor Economics (IZA).
    16. Norbert Berthold & Rainer Fehn, 2003. "Unemployment in Germany: Reasons and Remedies," CESifo Working Paper Series 871, CESifo.
    17. International Monetary Fund, 2006. "Germany: Selected Issues," IMF Staff Country Reports 2006/017, International Monetary Fund.
    18. Karl Aiginger, 2004. "Labour Market Reforms and Economic Growth. The European Experience in the Nineties," WIFO Working Papers 232, WIFO.
    19. Bruno Amable & Lilas Demmou & Donatella Gatti, 2006. "Institutions, unemployment and inactivity in the OECD countries," PSE Working Papers halshs-00590495, HAL.
    20. Kugler, Adriana & Pica, Giovanni, 2003. "The effects of employment protection and product market regulations on the Italian labor market," Discussion Paper Series In Economics And Econometrics 0310, Economics Division, School of Social Sciences, University of Southampton.

    More about this item

    Keywords

    Product market regulation; labor market regulation; employment growth; policy coordination; sequencing;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

    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:zbw:fubsbe:200610. 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: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/fwfubde.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.