Political Instability and Labor Market Institutions
51 Pages Posted: 14 Apr 2012
Abstract
This paper investigates the relationship between political instability and labor market institutions. We develop a theoretical model in which some features of the political process, by reducing the future yields of policy interventions, induce an incumbent government to choose labor market institutions that create wage rents and divert resources from public good provision and social insurance. We test these predictions empirically using panel data for 21 OECD countries for the period 1985-2006. We find strong evidence that political turnover and political polarization – our measures of political instability – are associated with a more regulated labor market, lower unemployment benefit replacement rates, and a smaller tax wedge on labor. We show also that there are strong complementarities between different dimensions of political instability, and evaluate their impact on labour market institutions across countries.
Keywords: political instability, labor market institutions, unemployment
JEL Classification: J64, J88, H11
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Does Fiscal Decentralization Improve Health Outcomes? Evidence from a Cross-Country Analysis
By David A. Robalino, Oscar Picazo, ...
-
The Politics of Economic Reform in Thailand: Crisis and Compromise
By Allen Hicken
-
Why Do Differences in the Degree of Fiscal Decentralization Endure?
By Xavier Calsamiglia, Teresa Garcia-milà, ...
-
Regional Redistribution and Risk Sharing in Italy: The Role of Different Tiers of Government
By Giampaolo Arachi, Caterina Ferrario, ...
-
Electoral Institutions and the National Provision of Local Public Goods
-
Decentralization Dilemma: Measuring the Degree and Evaluating the Outcomes