Euro-Productivity and Euro-Jobs Since the 1960s: Which Institutions Mattered?

36 Pages Posted: 20 Sep 2007

See all articles by Gayle J. Allard

Gayle J. Allard

Instituto de Empresa Business School

Peter H. Lindert

University of California, Davis - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: May 17, 2006

Abstract

How have labor market institutions and welfare-state transfers affected jobs and productivity in Europe? Many studies have tackled this question, with mixed results. This paper proposes an eclectic approach and gives a clearer answer to the issue.

Orthodox criticisms of European government institutions are right in some cases and wrong in others. Labor-market policies such as employment protection laws have become more costly since 1980 through their human-capital cost of protecting senior male workers at the expense of women and youth. Product-market regulations may have reduced GDP, though the evidence is less robust.

However, high taxes have shed the negative influence they had in the 1960s and 1970s, and other welfare-state institutions have caused no net harm to European jobs and growth. Coordinated wage bargaining has saved jobs with no cost in productivity. The welfare state's tax-based social transfers and even unemployment benefits have not clearly harmed employment or GDP.

Keywords: productivity, employment protection legislation, unemployment benefits, social spending, welfare state

JEL Classification: J2, J6, K31, I3

Suggested Citation

Allard, Gayle J. and Lindert, Peter H., Euro-Productivity and Euro-Jobs Since the 1960s: Which Institutions Mattered? (May 17, 2006). Instituto de Empresa Business School Working Paper No. WP06-22, Available at SSRN: https://ssrn.com/abstract=1015841 or http://dx.doi.org/10.2139/ssrn.1015841

Gayle J. Allard (Contact Author)

Instituto de Empresa Business School ( email )

Serrano 99
Madrid, 28006
Spain

Peter H. Lindert

University of California, Davis - Department of Economics ( email )

One Shields Ave
Davis, CA 95616
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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