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Will ‘structural reforms’ of labour markets reduce productivity growth? A firm-level investigation

Author

Listed:
  • Robert Vergeer

    (TNO (Netherlands Organisation for Applied Scientific Research), Leiden, The Netherlands)

  • Steven Dhondt

    (TNO (Netherlands Organisation for Applied Scientific Research), Leiden, The Netherlands and Catholic University of Leuven, Belgium)

  • Alfred Kleinknecht

    (TU Delft and WSI, Hans Böckler Foundation, Düsseldorf, Germany)

  • Karolus Kraan

    (TNO (Netherlands Organisation for Applied Scientific Research), Leiden, The Netherlands)

Abstract

More ‘flexible’ labour relations significantly reduce labour productivity growth in sectors that tend towards a ‘routinised’ (other than a ‘garage business’) innovation regime. We argue that structural reforms that make firing easier will diminish the loyalty and commitment of workers, making accumulation of (tacit) knowledge more difficult. It also reduces training, increases knowledge-leaking to competitors and favours autocratic management and the growth of management and control bureaucracies. Our results are consistent with findings in macro-level studies that wage-cost saving flexibilisation of labour relations and downward wage flexibility reduce labour productivity growth: a 1 per cent wage change causes a ≈ 0.4 per cent change in value added per labour hour.

Suggested Citation

  • Robert Vergeer & Steven Dhondt & Alfred Kleinknecht & Karolus Kraan, 2015. "Will ‘structural reforms’ of labour markets reduce productivity growth? A firm-level investigation," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 12(3), pages 300—317-3, December.
    • Handle: RePEc:elg:ejeepi:v:12:y:2015:i:3:p300-317
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    References listed on IDEAS

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    Cited by:

    1. Damiani, Mirella & Pompei, Fabrizio & Kleinknecht, Alfred, 2020. "When robots do (not) enhance job quality: The role of innovation regimes," MPRA Paper 103059, University Library of Munich, Germany.
    2. Campos, Nauro F. & Eichenauer, Vera Z. & Sturm, Jan-Egbert, 2020. "Close encounters of the European kind: Economic integration, sectoral heterogeneity and structural reforms," European Economic Review, Elsevier, vol. 129(C).
    3. Anne Margarian & Cécile Détang-Dessendre & Aleksandra Barczak & Corinne Tanguy, 2022. "Endogenous rural dynamics: an analysis of labour markets, human resource practices and firm performance," SN Business & Economics, Springer, vol. 2(8), pages 1-33, August.
    4. Igor Fedotenkov & Virmantas Kvedaras & Miguel Sanchez-Martinez, 2024. "Employment protection and labour productivity growth in the EU: skill-specific effects during and after the Great Recession," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 51(1), pages 209-262, February.
    5. Alfred Kleinknecht, 2017. "Supply-side labour market reforms: a neglected cause of the productivity crisis," Working Papers 0027, ASTRIL - Associazione Studi e Ricerche Interdisciplinari sul Lavoro.
    6. Hoxha, Sergei & Kleinknecht, Alfred, 2020. "When labour market rigidities are useful for innovation. Evidence from German IAB firm-level data," Research Policy, Elsevier, vol. 49(7).
    7. Vera Eichenauer & Ronald Indergand & Isabel Z. Martínez & Christoph Sax, 2020. "Constructing Daily Economic Sentiment Indices Based on Google Trends," KOF Working papers 20-484, KOF Swiss Economic Institute, ETH Zurich.
    8. Sergei Hoxha & Alfred Kleinknecht, 2024. "When structural reforms of labor markets harm productivity. Evidence from the German IAB panel," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 33(3), pages 541-554.
    9. Campos, Nauro F. & De Grauwe, Paul & Ji, Yuemei, 2023. "Structural reforms and economic performance: the experience of advanced economies," LSE Research Online Documents on Economics 120870, London School of Economics and Political Science, LSE Library.
    10. Randolph Luca Bruno & Elodie Douarin & Julia Korosteleva & Slavo Radosevic, 2022. "The Two Disjointed Faces of R&D and the Productivity Gap in Europe," Journal of Common Market Studies, Wiley Blackwell, vol. 60(3), pages 580-603, May.

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    More about this item

    Keywords

    flexible labour; labour productivity; innovation regimes; varieties of capitalism;
    All these keywords.

    JEL classification:

    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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