Are Protective Labor Market Institutions at the Root of Unemployment? A Critical Review of the Evidence
David Howell (),
Andrew Glyn and
Additional contact information
Baker Dean: Center for Economic and Policy Research
Capitalism and Society, 2007, vol. 2, issue 1, 1-73
A rapidly expanding empirical literature has addressed the widely accepted claim that employment-unfriendly labor market institutions explain the pattern of unemployment across countries. The main culprits are held to be protective institutions, namely unemployment benefit entitlements, employment protection laws, and trade unions. Our assessment of the evidence offers little support for this orthodox view. The most compelling finding of the cross-country regression literature is the generally significant and robust effect of the standard measure of unemployment benefit generosity, but there are reasons to doubt both the economic importance of this relationship and the direction of causation. The micro evidence on the effects of major changes in benefit generosity on the exit rate out of unemployment has been frequently cited as supportive evidence, but these individual level effects vary widely across studies and, in any case, have no direct implication for changes in the aggregate unemployment rate (due to ``composition" and ``entitlement" effects). Finally, we find little evidence to suggest that 1990s reforms of core protective labor market institutions can explain much of either the success of the ``success stories" or the continued high unemployment of the large continental European countries. We conclude that the evidence is consistent with a more complex reality in which a variety of labor market models can be consistent with good employment performance.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (117) Track citations by RSS feed
Downloads: (external link)
For access to full text, subscription to the journal or payment for the individual article is required.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bpj:capsoc:v:2:y:2007:i:1:n:1
Ordering information: This journal article can be ordered from
Access Statistics for this article
Capitalism and Society is currently edited by Edmund Phelps and Amar Bhidé
More articles in Capitalism and Society from De Gruyter
Bibliographic data for series maintained by Peter Golla ().