Publication detail

Labour Market Institutions and their Effect on Labour Market Performance in the New EU Member Countries

Author(s): PhDr. Kamila Fialová ,
doc. Ing. Ondřej Schneider MPhil., Ph.D.,
Type: Articles in refereed journals
Year: 2008
Number: 255
Published in: CESifo
Publishing place: Munich
Keywords: labour market, unemployment, European Union, labour market institutions
JEL codes: J730, J48, J51
Suggested Citation: Fialová, Kamila; Schneider, Ondrej: Labour Market Institutions and their Effect on Labour Market Performance in the New EU Member Countries. CESifo WP 2421, October 2008
Grants: Analysis of the Impact of the Selected Social Policy Instruments on the Czech Labour Market and a Broad International Comparison GACR 402/05/H510 Ekonomická teorie politických trhů
Abstract: This article focuses on the role of labour market institutions in explaining different labour market developments in European countries, with a special attention to the new European Union member countries. Labour market in these two parts of the EU witnessed diverging developments in the late 1990’s. While labour markets indicators generally improved in the “old” EU15, they were exposed to severe shocks in Central Europe. At the same time, Central European labour markets’ institutional background was changing and converging to the EU “standards”. This may allow us to analyse effects of various institutional setups and of their changes on major labour market indicators. We aim at complementing several studies from the late 1990’s by using more recent data that allow us to compare institutional setups from the mid 1990’s and early 2000’s both in “old” and “new” EU member states. We estimate effects of labour market institutions on various performance indicators (unemployment, long-term unemployment, employment, activity rate). Our results confirm that high taxes increase unemployment, while active labour market policies tend to reduce it. We also show that stricter employment protection, higher taxes and larger economic burden represented by the minimum wage decrease employment and activity rate. However, statistical tests indicate that there is a difference in the institutional effects between “old” and “new” EU members.
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