Understanding Labor Market Institutions: A Political Economy Perspective
CEPR Discussion Paper Series 1438
Posted: 8 Jan 1997
Date Written: October 1996
In this paper we argue that many of the rigidities that characterize European labor markets can be understood as the outcome of political influence by incumbent employees. We then empirically investigate the determinants of labor market institutions and show that the results are consistent with this view. Among other things, we find that higher exposure of the employed to unemployment facilitates a reduction in the level of employment protection; that unemployment benefits are lower, the more employment reacts to wages; and that a higher level of unemployment and a right-wing government slow down the growth rate of the minimum wage.
JEL Classification: E24, H53, J6
Suggested Citation: Suggested Citation