Labour market institutions - the problem of definitions and measurement
DOI:
https://doi.org/10.12775/EiP.2024.30Keywords
labour market policies, employment protection, institutional economicsAbstract
Motivation: Despite a wealth of research the role of labour market institutions (LMIs) remains controversial. The problem is on the increase lately because of socio-economic transformation affecting the functioning of labour markets. One of the explanations of the problem might be the lack of precise definitions and proper measures of LMIs, especially informal ones, that could be used in econometric research.
Aim: The aim of the paper is twofold. First, to follow the evolution of the concept of LMI measures in economic literature, both in the theoretical context and in empirical application. Second, to compare different measures of employment protection legislation (EPL) and assess their effectiveness in capturing the quality of workers’ protection. The analysis takes an institutional perspective which assumes that LMIs are a means to solve the problem of market inefficiencies rather than a source thereof.
Results: The paper identifies inadequacies in the way LMIs are measured and used in empirical research.
Keywords: labour market policies, employment protection, institutional economics
JEL: J08; J83; E02
References
Acharya, V., Baghai, R., & Subramanian, K. (2013). Labor Laws and Innovation. Journal of Law & Economics, 56(4), pp. 997-1037.
Adams, Z., Bastani, P., Bishop, L., & Deakin, S. (2017). The CBR-LRI dataset: methods, properties and potential of leximetric coding of labour laws. International Journal of Comparative Labour Law and Industrial Relations, 33(1), pp. 55-91. doi:doi.org/10.54648/ijcl2017004
Adams, Z., Bishop, L., Deakin, S., Fenwick, C., Martinsson Garzelli, S., & Rusconi, G. (2018). Protection and Different Forms of Employment: Analysis of a Panel of 117 Countries, 1990-2013. ECGI Working Paper Series in Law: Working Paper No. 406/2018.
Addison, J., & Teixeira, P. (2001). The Economics of Employment Protection. IZA Discussion Papers(381).
Agell, J. (2002). On the Determinants of Labour Makret Institutions: Rent Seeking vs. Social Insurance. German Economic Review, 3(2), pp. 107-135.
Aleksynska, M., & Cazes, S. (2016). Composite indicators of labour market regulations in a comparative perspective. IZA Journal of Labor Economics, 5(3), pp. 1-33. doi:10.1186/s40172-016-0043-y
Aleksynska, M., & Eberlein, F. (2016). Coverage of employment protection legislation (EPL). ILO, Geneva: Conditions of Work and Employment Series, no. 80.
Arestis, P., Ferreiro, J., & Gomez, C. (2020). Quality of employment and employment protection. Effects of employment protection on temporary and permanent employment. No. 48/2020: ASTRIL Working Paper.
Arestis, P., Ferreiro, J., & Gomez, C. (2023). Does employment protection legislation affect employment and unemployment? Economic Modelling, 126, pp. 1-13. doi:doi.org/10.1016/j.econmod.2023.106437
Arestis, P., Ferreiro, J., & Gómez, C. (2021). Labour Market Flexibilization and Income Distribution in Europe. Paneconomicus, 68(2), pp. 167-185.
Autor, D., Kerr, W., & Kugler, A. (2007). Do Employment Protections Reduce Productivity? Evidence from the U.S. States. NBER Working Paper(12860).
Baker, D., Glyn, A., Howell, D., & Schmitt, J. (2005). Labor Market Institutions and Unemployment: A Critical Assessment of the Cross-Country Evidence. In R. Howell (ed.), Fighting Unemployment: The Limits of Free Market Orthodoxy. Oxford: Oxford University Press.
Bartling, B., Fehr, E., & Schmidt, K. (2013). Use and abuse of authority: a behavioral foundation of the employment relation. Journal of the European Economic Association, 11(4), pp. 711-742.
Belot, M., Boone, J., & Van Ours, J. (2007). Welfare-Improving Employment Protection. Economica, 74(295), pp. 381-396.
Bentolila, S., & Bertola, G. (1990). Firing costs and labour demand: How bad is eurosclerosis? Review of Economic Studies, 57, pp. 381-402.
Berg, J., & Cazes, S. (2008). Policymaking Gone Awry: The Labor Market Regulations of the Doing Business Indicators. Comparative Labor Law & Policy Journal, 29, pp. 349-382.
Bertola, G. (1992). Labor Turnover Costs and Average Labor Demand. Journal of Labor Economics, 10(4).
Bertola, G. (1999). Microeconomic Perspectives on Aggregate Labor Markets. In O. Ashenfelter, & D. Card, Handbook fo Labor Economics (Vol. 3C, pp. 2985-3028). Amsterdam: Elsevier.
Betcherman, G. (2015). Labor Market Regulation: What do we know about their Impacts in Developing Countries? The World Bank Research Observer, 30(1), pp. 124-153.
Blanchard, O., & Wolfers, J. (2000). The role of shocks and institutions in the rise of European unemployment: The aggregate evidence. The Economic Journal, 110(March), pp. C1-C33.
Blau, F., & Kahn, L. (1999). Institutions and Laws in the Labor Market. In O. Ashenfelter, & D. Card, Handbook of Labor Economics (Vol. 3). Elsevier Science B.V.
Boeri, T. (1999). Enforcement of Employment Security Regulations, On-the-Job Search and Unemployment Duration. European Economic Review, 43(January), pp. 65-89.
Boeri, T. (2011). Institutional Reforms and Dualism in European Labor Markets. In O. Ashenfelter, & D. Card, Handbook of Labor Economics (Vol. IV). Amsterdam: North Holland.
Boeri, T., & Jimeno, J. (2003). The Effects of Employment Protection: Learning from Variable Enforcement. SSRN Electronic Journal, 49(8). doi:10.1016/j.euroecorev.2004.09.013
Burda, M. (1992). A Note on Firing Costs and Severance Benefits in Equilibrium Unemployment. Scandinavian Journal of Economics, 94(3), pp. 479-489. doi:doi.org/10.2307/3440074
Chor, D., & Freeman, R. (2005). The 2004 Global Labor Survey: Workplace Institutions and Practices around the World. Washington, D.C.: NBER Working Paper 11598.
Ciminelli, G., Duval, R., & Furceri, D. (2018). Employment Protection Deregulation and Labor Shares in Advanced Economies. IMF Working Paper: WP/18/186.
Deakin, S. (2018). The use of quantitative methods in labour law research: An assessment and reformulation. Working Paper no. 495: Centre for Business Research, Univeristy of Cambridge.
Deakin, S., Lele, P., & Siems, M. (2007). The evolution of labour law: Calibrating and comparing regulatory regimes. International Labour Review, 146(3-4), pp. 133-162.
Deakin, S., Malmberg, J., & Sakar, P. (2014). How do labour laws affect unemployment and the labour share of national income? The experience of six OECD countries, 1970-2010. International Labour Review, 153(1), pp. 1-27. doi:doi.org/10.1111/j.1564-913X.2014.00195.x
Doucouliagos, H., & Stanely, D. (2009). Publication selection bias in minimum-wage research? A meta-regression analysis. British Journal of Industrial Relations, 47(2), pp. 406-428. doi:doi.org/10.1111/j.1467-8543.2009.00723.x
Eichhorst, W., Feil, M., & Braun, C. (2008). What Have We Learned? Assessing Labor Market Institutions and Indicators. IZA Discussion Paper Series(3470).
Elmeskov, J., Martin, J., & Scarpetta, S. (1998). Key lessons from labour market reforms: Evidence from OECD countries' experiences. Swedish Economic Policy Review, 5(2), pp. 205-252.
Emerson, M. (1988). Regulation and deregulation of the labour market: Policy regimes for the recruitment and dismissal of employees in the industrialized countries. European Economic Review, 32(4), pp. 775-817.
Feldmann, H. (2003). Labor Market Regulation and Labor Market Performance: Evidence Based on Surveys among Senion Business Executives. Kyklos, 56(4), pp. 509-540.
Freeman, R. (2002). Institutional Differences and Economic Performance among OECD Countries. CEP Discussion Paper(0557).
Freeman, R. (2007). Labor Market Institutions Around the World. NBER Working Paper Series(13242).
Freeman, R., Kruse, D., & Blasi, J. (2007). The same yet different: Worker reports on labour practies and outcomes in a single firm across countries. NBER: Working Paper 13233.
Freyens, B., & Verkerke, J. (2017). Mapping employment dismissal law: a leximetric investigation of EPL stringency and regulatory style. ILO, Geneva: Conditions of Work and Employment Series no. 88.
Giotis, G. (2024). Labor Market Institutions and Employment. Encyclopedia, 2024(4), pp. 273-294. doi:doi.org/10.3390/encyclopedia4010021
Grubb, D., & Wells, W. (1993). Employment Regulation and Patterns of Work in EC Countries. OECD Economic Studies, 21(Winter), pp. 7-58.
Hamermesh, D. (1993). Labor Demand. Princeton: Princeton University Press.
Hamermesh, D., & Pfann, G. (1996). Adjustment cost in factor demand. Journal of Economic Literature, 34(3), pp. 1264-1292.
Heckman, J., & Pages Serra, C. (2004). Law and enforcement: Lessons from Latin America and the Caribbean. Chicago: University of Chicago Press.
Holmlund, B. (2013). What do Labor Market Institutions Do? Working Paper 2013:23: Uppsala University.
Hopenhayn, H., & Rogerson, R. (1993). Job Turnover and Policy Evaluation: A General Equilibrium Analysis. Journal of Political Economy, 101(October), pp. 915-938.
Howell, D., Baker, D., Glyn, A., & Schmitt, J. (2007). Are Protective Labor Market Institutions at the Root of Unemployment? A Critical Review of the Evidence. Capitalism and Society, 2(1). doi:10.2202/1932-0213.1022
ILO. (2012). World of Work Report 2012: Better Jobs for a Better Economy. Geneva: International Labour Organization and International Institute for Labour Studies.
IMF. (2003). Unemployment and Labor Market Institutions: Why Reforms Pay Off. In IMF, World Economic OUtlook. Washington, D.C.: International Monetary Fund.
Kaufman, B. (1993). The Evolution of Thought on the Competitive Nature of Labor Markets. In C. Kerr, & P. Staudohar, Labor Economics and Industrial Relations: Markets and Institutions. Cambridge: Harvard Univesity Press.
Lazear, E. (1990). Job Security Provisions and Employment. Quarterly Journal of Economics, 105(October), pp. 699-726.
Lee, S., & McCann, D. (2008). Measuring Labour Market Institutions: Conceptual and Methodological Questions on ‘Working Hours Rigidity'. In J. Berg, & D. Kucera, In Defence of Labor Market Institutions. Cultivating Justice in the Developing World (pp. 32-63). London: Palgrave MacMillan. doi:https://doi.org/10.1057/9780230584204
Martin, J., & Scarpetta, S. (2012). Setting It Right: Employment Protection, Labor Reallocation and Productivity. De Economist, 160(2), pp. 89-116.
Nickell, S. (1997). Unemployment and Labor Market Rigidities: Europe versus North America. Journal of Economic Perspectives, 11(3), pp. 55-74.
Nickell, S., Nunziata, L., & Ochel, W. (2005). Unemployment in the OECD Since the 1960s. What Do We Know? The Economic Journal, 115(500), pp. 1-27.
North, D. (1990). Institutions, Institutional Change and Economic Performance. Cambridge: Cambridge University Press.
Ochel, W. (2005). Concepts and Measurement of Labour Market Institutions. CESifo DICE Report, 03(4), pp. 40-55.
OECD. (1994). OECD Jobs Study. Paris: OECD.
OECD. (2013). Employment Outlook 2013. Paris: OECD.
Petrin, A., & Sivadasan, J. (2006, December). Job Security Does Affect Economic Efficiency: Theory, A New Statistic, and Evidence from Chile. IPC Working Paper Series(21).
Piasna, A., & Myant, M. (2017). Myths of employment deregulation: how it neither creates jobs nor reduces labor market segmentation. Brussels: ETUI.
Pissarides, C. (1985). Taxes, Subsidies and Equilibrium Unemployment. Review of Economic Studies(LII).
Ronconi, L., & Raphael, S. (2024). Measuring Effective Labor Regulation in the Less Developed World: Recent Advances and Challenges Ahead. March: IZA Policy Paper No. 210.
Saint-Paul, G. (2002). The Political Economy of Employment Protection. Journal of Political Economy, 110(5), pp. 672-704.
Singh, A. (1995). Institutional Requirements for Full Employment in Advanced Economies. International Labour Review, 134(4-5).
Szczepaniak, M., & Szulc-Obłoza, A. (2019). Labour market institutions and income inequalities across the European Union. Ekonomia i Prawo. Economics and Law, 18(3), pp. 365–377. doi:10.12775/EiP.2019.025
Weller, J. (2009). Regulation, Worker Protection and Active Labour Market Policies in Latin America. Santiago, Chile: ECLAC.
Williamson, O., Wachter, M., & Harris, J. (1975). Understanding the Employment Relation: The Analysis of Idiosyncratic Exchange. Bell Journal of Economics, 6(1), pp. 250-278.
World Bank. (2011). Doing Business Employing Workers Consultative Group: Final Report. Retrieved from https://www.doingbusiness.org/content/dam/doingBusiness/media/Miscellaneous/Final-EWI-CG-report-2011.pdf
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2024 Marta Sordyl
This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.
Stats
Number of views and downloads: 199
Number of citations: 0
