Employment Outcomes and the Interaction between Product and Labor Market Deregulation: Are They Substitutes or Complements?

46 Pages Posted: 7 May 2007

See all articles by Giuseppe Fiori

Giuseppe Fiori

Boston College

Giuseppe Nicoletti

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Stefano Scarpetta

OECD, Directorate for Employment, Labour and Social Affairs; IZA Institute of Labor Economics

Fabio Schiantarelli

Boston College - Department of Economics; IZA Institute of Labor Economics

Date Written: April 2007

Abstract

This paper provides a systematic empirical investigation of the effect of product market liberalization on employment when there are interactions between policies and institutions in product and labor markets. Using panel data for OECD countries over the period 1980-2002, we present evidence that product market deregulation is more effective at the margin when labor market regulation is high. Moreover, there is evidence in our sample that product market deregulation promotes labor market deregulation. We show that these results are mostly consistent with the basic predictions of a standard bargaining model, such as Blanchard and Giavazzi (2003), extended to allow for a richer specification of the fall back position of the union and for taxation.

Keywords: employment, competition, deregulation, liberalization, unions

JEL Classification: J23, J50, L50

Suggested Citation

Fiori, Giuseppe and Nicoletti, Giuseppe and Scarpetta, Stefano and Schiantarelli, Fabio, Employment Outcomes and the Interaction between Product and Labor Market Deregulation: Are They Substitutes or Complements? (April 2007). IZA Discussion Paper No. 2770, Available at SSRN: https://ssrn.com/abstract=984444

Giuseppe Fiori

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

HOME PAGE: http://fmwww.bc.edu/fmrc/contact/show_book.php?firstname=Giuseppe&lastname=Fiori&catid=2

Giuseppe Nicoletti

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France
+33 1 4524 8730 (Phone)
+33 1 4524 1347 (Fax)

Stefano Scarpetta

OECD, Directorate for Employment, Labour and Social Affairs ( email )

2 rue Andre Pascal
Paris Cedex 16, 75016
France
+33 1 45 24 19 88 (Phone)
+33 1 45 24 18 59 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Fabio Schiantarelli (Contact Author)

Boston College - Department of Economics ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States
617-552-4512 (Phone)
617-552-2308 (Fax)

HOME PAGE: http://https://sites.google.com/a/bc.edu/fabio-schiantarelli/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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