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The relationship between labor market institutions and innovation in 177 European regions over the period 2000–2015

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  • Perone, Gaetano

Abstract

The main goal of this paper is to investigate the relationship between labor market institutions (LMIs) and patents in 177 NUTS-1 and NUTS-2 European regions. Fixed effects models, ordinary least squares (OLS), the generalized method of moments estimation of the fixed effects (FE-GMM), multilevel modeling (MLM), and spatial models are employed. Patents are negatively correlated with EPL and union density and positively associated with wage bargaining coverage and centralization. As a result, a uniform wage that is higher than the competitive wage can enable the Schumpeterian creative destruction process, forcing firms to invest in innovation to remain in the market. Spatial analysis emphasizes that regional proximity promotes the flow of knowledge and increases the chance of innovation. Interactions also matter. Increased bargaining power and coordination, in particular, may outweigh the negative consequences of isolated EPL reforms. Thus, policies that strengthen wage-setting institutions are required in Europe to boost innovation.

Suggested Citation

  • Perone, Gaetano, 2024. "The relationship between labor market institutions and innovation in 177 European regions over the period 2000–2015," Structural Change and Economic Dynamics, Elsevier, vol. 70(C), pages 128-149.
    • Handle: RePEc:eee:streco:v:70:y:2024:i:c:p:128-149
    DOI: 10.1016/j.strueco.2023.12.016
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    More about this item

    Keywords

    Patents; EPL; Wage-setting institutions; Multilevel models; Spatial analysis;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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