Euro-Productivity and Euro-Jobs Since the 1960s: Which Institutions Mattered?
36 Pages Posted: 20 Sep 2007
Date Written: May 17, 2006
Abstract
How have labor market institutions and welfare-state transfers affected jobs and productivity in Europe? Many studies have tackled this question, with mixed results. This paper proposes an eclectic approach and gives a clearer answer to the issue.
Orthodox criticisms of European government institutions are right in some cases and wrong in others. Labor-market policies such as employment protection laws have become more costly since 1980 through their human-capital cost of protecting senior male workers at the expense of women and youth. Product-market regulations may have reduced GDP, though the evidence is less robust.
However, high taxes have shed the negative influence they had in the 1960s and 1970s, and other welfare-state institutions have caused no net harm to European jobs and growth. Coordinated wage bargaining has saved jobs with no cost in productivity. The welfare state's tax-based social transfers and even unemployment benefits have not clearly harmed employment or GDP.
Keywords: productivity, employment protection legislation, unemployment benefits, social spending, welfare state
JEL Classification: J2, J6, K31, I3
Suggested Citation: Suggested Citation
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