Damiani, Mirella and Pompei, Fabrizio (2009): Labour protection and productivity in the European economies: 1995-2005.
Download (447Kb) | Preview
The present study examines cross-national and sectoral differences in multifactor productivity growth in sixteen European countries from 1995 to 2005. The main aim is to ascertain the role of flexible employment contracts and collective labour relationships in explaining the ample differentials recorded in the European economy. Research Findings We use the EU KLEMS database for growth accounting and a broad set of indicators of labour regulations, covering two distinct ‘areas’ of labour regulation: employment laws and collective relations laws. This comprehensive approach allow us to consider arrangements that regulate allocation of labour inputs (fixed-term, part-time contracts, hours worked) and of payoff and decision rights of employees. We find that, since 1995, European countries have not followed similar patterns of growth. A large number of variations between European economies are caused by deep differentials in multifactor productivity and part of this heterogeneity is caused by sectoral diversities. We show that, in labour-intensive sectors such as services, fixed-term contracts, which imply shorter-term jobs and lower employment tenures, may discourage investment in skills and have detrimental effects on multifactor productivity increases. We also find that some forms of labour regulation and arrangements that give a ‘voice’ to employees mitigate these perverse effects on efficiency patterns. Employment protection reforms which slacken the rules of fixed-term contracts cause potential drawbacks in terms of low productivity gains. More stringent regulation of these practices, as well as a climate of collective relations, sustain long-term relationships and mitigate these negative effects.
|Item Type:||MPRA Paper|
|Original Title:||Labour protection and productivity in the European economies: 1995-2005|
|Keywords:||productivity, labour regulation, comparative institutions|
|Subjects:||O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital; Skills; Occupational Choice; Labor Productivity
J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining > J50 - General
|Depositing User:||Mirella/M. Damiani|
|Date Deposited:||14. Jan 2009 09:39|
|Last Modified:||14. Feb 2013 15:12|
Aghion P. and Griffith R. (2005), Competition and Growth, Reconciling Theory and Evidence, Cambridge, MA, MIT Press.
Autor, D.H., Kerr W.R. and Kugler A.D. (2007), “Do Employment Protections Reduce Productivity? Evidence from U.S. States”, Economic Journal, 117, F189-F217.
Bassanini A.et al. (2005), Workplace Training in Europe, IZA DP No. 1640
Bassanini A. and Venn D. (2007), “Assessing the impact of labour market policies on productivity: a difference-in-differences approach”, OECD Social, Employment and Migration Working Paper, OECD, Paris.
Bassanini A., Nunziata L. and Venn D. (2008), “Job Protection Legislation and Productivity Growth in OECD Countries”, IZA Discussion Paper, n. 3555.
Belot, M., J. Boone and van Ours J.C. (2007), “Welfare-Improving Employment Protection”, Economica, 74, pp. 381-396.
Bertola G. (1994),”Flexibility, Investment, and Growth’, Journal of Monetary Economics, 34, pp. 215–238.
Bertola G. (2008), Labor Market Regulation: motives, measures, effects, mimeo.
Blanchard O. and Landier A., (2002), “The Perverse Effects of Partial Labour Market Reforms: Fixed Duration Contracts in France”, The Economic Journal, 112, pp. F214 -F244.
Boeri T. and Garibaldi P. (2007), “Two Tier Reforms Of Employment Protection: A Honeymoon Effect?”, The Economic Journal, 117, pp. F357–F385.
Boeri T. and Jimeno J. (2005), “The effects of employment protection: Learning from variable enforcement”, European Economic Review, 49, pp. 2057-77. Boeri T and van Ours J. (2008), The Economics of Imperfect Labor Markets, Princeton:Princeton University Press. Botero J. C., Djankov S., La Porta R., Lopez-de-Silanes F., Shleifer A. (2002), “The Regulation of Labor”, Quarterly Journal of Economics, 119, pp. 1339-1382. Cahuc and Postel-Vinay (2002), “Temporary jobs, Employment Protection, and Labor Market Performance”, Labour Economics, 9, pp. 63-91.
Carlin W., Soskice D. (2007), “Reforms, Macroeconomic Policy and Economic Performance in Germany”, CEPR Discussion Paper No. 6415.
Dew-Becker I. and Gordon R.J. (2008), “The Role of Labor Market Changes in the Slowdown of European Productivity Growth”, NBER Working Paper 13840.
Dolado J.J., Garcia- Serrano C. and Jimeno J. F. (2002), “Drawing Lessons from the Boom of Temporary Jobs in Spain”, The Economc Journal, 112, F270- F295.
Engellandt, A. and Riphahn R. (2004), “Temporary Contracts and Employee Effort”, CEPR Discussion Paper no. 4178.
European Commission (2004), Industrial Relations in Europe, European Commission Directorate-General for Employment and Social Affairs Unit D, Brussels.
EUROSTAT (1997), “Part-Time Work in the European Union”, Statistics in Focus, No. 13, Statistical Office of the European Communities, Luxembourg.
Freeman R.B., (2007), “Labour market institutions around the world”, NBER Working Papers No. 13242.
Freeman, R. B. and Lazear, E. P. (1995), “An economic analysis of works councils”, in Rogers J. and Streeck W. (eds.), Works Councils: Consultation, Representation, Cooperation. Chicago, IL: University of Chicago Press for NBER. pp. 27-50.
Freeman R.B. and Medoff J.M. (1984), What do unions do?, New York: Basic Books.
Foster, L., Haltiwanger J. and Krizan C.J. (2006), “Market Selection, Reallocation and Restructuring in the US Retail Trade Sector in the 1990s”, Review of Economics and Statistics, 88, pp. 748-758.
Garibaldi P., (2006), Personnel Economics in Imperfect Labour Markets, Oxford, Oxford University Press.
Goux D., Maurin E. and Pauchet M. (2001), “Fixed-term contracts and the dynamics of labour demand”, European Economic Review, 45, pp. 533-552.
Güell M. (2000), “Fixed-term contracts and unemployment: an efficiency wage analysis, Princeton University Press, IRS working paper n. 433.
Hassel A. and Rehder B. (2001), “Institutional Change in the German Wage Bargaining System- The Role of Big Companies”, MPIfG Working Paper, n. 01/9. Hopenhayn H. and Rogerson R. (1993),“Job Turnover and Policy Evaluation: A General Equilibrium Analysis”, Journal of Political Economy, 101, pp. 915-938.
Krueger A. (1991), The Evolution of Unjust-Dismissal Legislation in the United States, Industrial and Labor Relations Review, 44, pp. 644–660.
Inklaar R., Timmer M.P. and van Ark B., (2008), “Market services productivity across Europe and the US”, Economic Policy, 53, pp. 139-194
La Porta, R., Shleifer A., Vishny R. and De Silanes F. (1998), Law and Finance, Journal of Political Economy, 106, pp. 1113-1155.
La Porta, R., De Silanes F., Shleifer A., (199), Corporate ownership around the world, The Journal of Finance, 54, pp. 471-517.
c J. (1999), “Individual Employment Contracts”, in Ashenfelter O. and Card D. (eds.), Handbook of Labor Economics, Amsterdam. North Holland
Micco A. and Pages C. (2006), “The Economic Effects of Employment Protection: Evidence from International Industry-Level Data”, IZA Discussion Paper no. 2433.
Nicoletti G. et al. (2001), “Interactions between product and labour market regulations: Do they affect employment? Evidence from OECD countries”, OECD, Economics Department Working Papers n. 312.
Nicoletti, G. and Scarpetta S. (2003). “Regulation, Productivity, and Growth, OECD Evidence,” Economic Policy, 36, pp. 9-72.
Nickell, S.J.and Layard R. (1999): “Labour market institutions and economic performance” in Ashenfelter O. and Card D. (eds.), Handbook of Labor Economics, Amsterdam: North-Holland.
OECD (1999), Employment Outlook, Paris.
OECD (2004), Employment Outlook, Paris.
OECD (2007),“More Jobs but less productive? The impact of labour market policies on productivity” (Chapter 2), in Employment Outlook, available on line at www.oecd.org/els/employment outlook/2007
Pissarides C. (2001), “Employment Protection”, Labour Economics, 8, pp. 131-159.
Saint-Paul, G. (2002), “Employment Protection, International Specialization, and Innovation”, European Economic Review, 46, pp. 375-395.
Schivardi F. and Torrini R. (2008), “Identifying the effects of firing restrictions through size-contingent differences in regulation”, Labour Economics, 15, pp. 482-511.
Solow, R.(1957): "Technical Change and the Aggregate Production Function", Review of Economics and Statistics, 39, pp. 312-320.
Timmer M., van Moergastel T. and Stuivenwold E. (2007), EU KLEMS growth and productivity accounts, Groningen Growth and Development Centre
van Ark B., O’Mahony M., Timmer M.P., (2008) The productivity gap between Europe and the United States: trends and causes, Journal of Economic Perspectives, 22, pp.25-44.
Wasmer E. (2002), “Interpreting Europe and US labour market differences: the specificity of human capital investments”, IZA Discussion Paper n.549