Generality, State Neutrality and Unemployment in the OECD

Nils Karlson, Marcus Box and Almas Heshmati ()

No 200931, TEMEP Discussion Papers from Seoul National University; Technology Management, Economics, and Policy Program (TEMEP)

Abstract: According to Buchanan and Congleton (1998), the generality principle in politics blocks special interests. Consequently, the generality principle should thereby promote economic efficiency. This study tests this hypothesis on wage formation and labor markets, by investigating whether generality defined as state neutrality could explain employment performance among OECD countries during 1970-2003. We identify three types of non-neutrality as concerns unemployment. These include the level or degree of government interference in the wage bargaining process over and above legislation which facilitate mutually beneficial wage agreements, the constrained bargaining range (meaning the extent to which the state favors or blocks certain outcomes of the bargaining process), and the cost shifting (which relates to state interference shifting the direct or indirect burden of costs facing the parties on the labor market). Our overall hypothesis is that non-neutrality or non-generality increases unemployment rates. The empirical results from the general conditional model suggest that government intervention and a constrained bargaining range clearly increase unemployment, while a few of the cost shifting variables have unexpected effects. The findings thus give some, but definitely not unreserved, support for the generality principle as a method to promote economic efficiency. One implication may be that the principle should be amended by other requirements if the political process indeed shall be able to promote economic efficiency.

Keywords: generality; state neutrality; efficiency; unemployment; wage bargaining; cost shifting; OECD (search for similar items in EconPapers)
JEL-codes: C23 C78 E24 J64 N30 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2009-11, Revised 2009-11
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://temep-repec.my-groups.de/DP-31.pdf First version, 2009 (application/pdf)

Related works:
Journal Article: Generality, State Neutrality and Unemployment in the OECD (2013)
Journal Article: Generality, State Neutrality and Unemployment in the OECD (2013)
Journal Article: Generality, State Neutrality and Unemployment in the OECD (2013)
Working Paper: Generality, State Neutrality and Unemployment in the OECD (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:snv:dp2009:200931

Access Statistics for this paper

More papers in TEMEP Discussion Papers from Seoul National University; Technology Management, Economics, and Policy Program (TEMEP) Contact information at EDIRC.
Bibliographic data for series maintained by Jorn Altmann ().