The Political Economy Of Labour Market Reforms

By looking at 20 reform efforts in ten OECD countries, this report examines why some reforms are implemented and other languish.

Duman examines the transition from Keynesianism to monetarism by presenting an analysis of labour market reforms in Greece and Turkey - questioning the role of class struggle on the implementation process. She also scrutinises the influence of the global economic crisis and the execution of reform policies in these two countries.

Reforms in labour and product markets play a central role in government policies. The Political Economy of Structural Reforms in Europe takes stock of current frontier work. It brings together leading contributions from academia, the central banks in Europe, and the OECD to argue that structural reforms can make a fundamental contribution to improve economic performance across Europe. The Political Economy of Structural Reforms in Europe brings together theoretical and empirical studies that address the potential role of structural reforms in restoring macroeconomic stability, resuming economic growth, addressing income inequality, and grappling secular stagnation. It throws new light on the determinants and effects of structural reforms and on how these shape the European integration experience.

According to most orthodox economists, labour market rigidities are the key culprit for such high unemployment as has been observed in Europe during the past three decades. But governments that have attempted to follow the standard prescription of removing rigidities have often faced harsh political opposition. This book looks at why labour market institutions such as employment protection, unemployment benefits, and relative wage rigidities exist, what role they play in society, why they seem so persistent, where the pressure to reform them comes from, and whether reform can be politically viable or not. The book ascribes a central role to the existence of underlying microeconomic frictions and to redistributive pressures between rich and poor, and shows how these ingredients may give rise to labour market rents, which in turn explain why a coherent set of rigidities arise as the outcome of the political process. It is also shown that, at the same time, such rents create resistance to reform, and contribute to locking society into a high-unemployment, rigid equilibrium. Finally, the basic principles exposed in the book are used to discuss various strategies for a successful labour market reform.

This book presents a selection of contributions on the timely topic of structural reforms in Western economies, written by experts from central banks, the International Monetary Fund, and leading universities. It includes latest research on the impacts of structural reforms on the market economy, especially on the labor market, and investigates the results of collective bargaining in theory and practice. The book also comprises case studies of structural reforms. A literature survey on the topic serves as a valuable source for further research. The book is written by and targeted at both academics and policy makers.

The political economy literature has put forward a multitude of hypotheses regarding the drivers of structural reforms, but few, if any, empirically robust findings have emerged thus far. To make progress, we draw a parallel with model uncertainty in the growth literature and provide a new version of the Bayesian averaging of maximum likelihood estimates (BAMLE) technique tailored to binary logit models. Relying on a new database of major past labor and product market reforms in advanced countries, we test a large set of variables for robust correlation with reform in each area. We find widespread support for the crisis-induces-reform hypothesis. Outside pressure increases the likelihood of reform in certain areas: reforms are more likely when other countries also undertake them and when there is formal pressure to implement them. Other robust correlates are more specific to certain areas—for example, international pressure and political factors are most relevant for product market and job protection reforms, respectively.

Continuities and Discontinuities assesses the making of Canadian social and labour market policy in the context of two factors—globalization and neoconservatism. Specialists from a variety of fields and disciplines examine the relation between Canada's changing political economy and its social welfare and labour market policy. These essays analysing continuities and discontinuities in policy emerged from research that initially was presented at the 5th Conference on Social Welfare Policy held at Bishop's University in 1991, and that since then has been revised to reflect the situation of the mid-1990s. Part I introduces the three broad areas explored in the volume. Part II addresses new trends in Canadian political economy and their relation to public policy. Part III analyses social welfare policy. Of the essays included, several investigate the democratizing of the Canadian welfare state and controversies in the conception and definition of poverty. Others address the AIDS crisis, health policy, and social policy issues that primarily affect women, children, and native peoples. In Part IV recent Canadian labour market policies are investigated and appraised, and alternatives suggested or evaluated. One essay argues that employment security and high wages could generate high productivity and international competitiveness; another examines the impact of the growth in part-time employment on the welfare state; a third probes the relation of organized labour to a guaranteed annual income; others investigate the impact of neoconservatism on labour market policy-making in various provinces and regions. Globalization and neoconservatism continue to shape change and require constant evaluation. These thought-provoking and informative essays are an important contribution to the ongoing debate on social welfare and labour market policy in Canada.

Investigates the transformation of German labour market policy, showing that Germany has departed from the conservative-corporatist path of welfare, especially with the Hartz Legislation of the Red-Green government.