Labor market institutions and industrial performance: an evolutionary study

Date

2008-08-01

Author

Kilicaslan, Yilmaz
Taymaz, Erol

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This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

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This study investigates the impact of labor market institutions on industrial performance from a Schumpeterian perspective. We suggest that labor market institutions play a very important role in the process of creative destruction, because they may create an environment that encourages and enforces innovation, and help to reallocate resources, most importantly labor, through swift elimination of weak performers. We specifically look at the effects of the quantity of labor market regulations and inter-industry wage differentials on labor productivity for a panel of 44 countries for the period 1965-1999. Our findings suggest that those countries that introduce more regulations on conditions of employment and wages achieve higher levels of productivity. Moreover, wage compression raises productivity by reallocating resources to productive activities.

Subject Keywords

Labor market regulation, Flexibility, Industrial structure, Productivity

URI

https://hdl.handle.net/11511/33014

Journal

JOURNAL OF EVOLUTIONARY ECONOMICS

DOI

https://doi.org/10.1007/s00191-008-0098-4

Collections

Department of Economics, Article

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Citation Formats

Y. Kilicaslan and E. Taymaz, “Labor market institutions and industrial performance: an evolutionary study,” JOURNAL OF EVOLUTIONARY ECONOMICS, pp. 477–492, 2008, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/33014.