The Political Economy of Labour Market Institutions
Gilles Saint-Paul
Abstract
Most economists think that unemployment is high in Europe because of rigid labour market institutions such as minimum wages, unemployment benefits, and employment protection. The book develops a theory of labour market institutions as the outcome of the political process. A central hypothesis is that they will be chiefly determined by the interests of employed workers with intermediate skill levels. We show that redistributive conflict between these workers and more skilled workers may lead to an outcome where a set of rigid institutions arise. We analyse why reform may be difficult because of ... More
Most economists think that unemployment is high in Europe because of rigid labour market institutions such as minimum wages, unemployment benefits, and employment protection. The book develops a theory of labour market institutions as the outcome of the political process. A central hypothesis is that they will be chiefly determined by the interests of employed workers with intermediate skill levels. We show that redistributive conflict between these workers and more skilled workers may lead to an outcome where a set of rigid institutions arise. We analyse why reform may be difficult because of status‐quo bias, and discuss how it may nevertheless be implemented by choosing an appropriate design or timing for the reform.
Keywords:
employment protection,
labour market institutions,
politico‐economic complementarities,
rents,
status‐quo bias,
two‐tier systems,
unemployment,
unemployment benefits,
wage rigidity
Bibliographic Information
| Print publication date: 2000 |
Print ISBN-13: 9780198293323 |
| Published to Oxford Scholarship Online: November 2003 |
DOI:10.1093/0198293321.001.0001 |
