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On the Benefits from Rigid Labour Markets: Norms, Market Failures, and Social Insurance

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  • Agell, Jonas

    (Department of Economics)

Abstract

The common view that far-reaching labour market deregulation is the only remedy for high European unemployment is too simplistic. First, the evidence suggests that deeply rooted social customs are an important cause of wage rigidity, going beyond the legal constraints emphasized in the political debate. Second, in a second-best setting, a compressed wage structure may generate an efficiency gain. Finally, based on simple plots of the relation between labour market institutions and openness in OECD countries, I conclude that the globalization of economic activity may lead to increased demand for various labour market rigidities.

Suggested Citation

  • Agell, Jonas, 1998. "On the Benefits from Rigid Labour Markets: Norms, Market Failures, and Social Insurance," Working Paper Series 1998:17, Uppsala University, Department of Economics.
    • Handle: RePEc:hhs:uunewp:1998_017
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    Keywords

    Labour market Institutions; Norms; Market failures; Social insurance;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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