The Quality of Labor Relations and Unemployment
Olivier J. Blanchard
International Monetary Fund (IMF); National Bureau of Economic Research (NBER)
New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER)
June 15, 2004
MIT Department of Economics Working Paper No. 04-25
In countries where wages are primarily set by collective bargaining, the effects on unemployment of changes in the economic environment depend crucially on the speed of learning of unions. This speed of learning is likely to depend in turn on the quality of the dialogue that unions have with firms, on what can more generally be called the quality of labor relations. In this paper, we examine the role this quality of labor relations has played in the evolution of unemployment across European countries over the last 30 years. We conclude that it has played an important role: Countries with worse labor relations have experienced higher unemployment. This conclusion remains even after controlling for labor institutions.
Number of Pages in PDF File: 28
Keywords: Unemployment, labor relations, unions, strikes, Europe
JEL Classification: E24, J5, J64
Date posted: June 25, 2004
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