Reforms of Collective Bargaining Institutions in European Union Countries: Bad Timing, Bad Outcomes?

This paper investigates whether flexibility-enhancing reforms of national collective bargaining systems have positive outcomes in terms of employment and unemployment in the short-term, especially when implemented during an economic downturn. The analysis consists in applying local projections to a novel panel database of reforms of collective bargaining institutions in EU countries in the period 2000-2018. There is no evidence that making collective bargaining institutions more flexible during a recession has a positive effect on employment or unemployment in the short term. More specifically, reforms that reduce bargaining coverage have negative short-term effects, particularly on the employment of young people and low-educated workers, and are associated with a decline in the share of temporary jobs. The results do not support the idea that collective bargaining institutions should be reformed during a recession to boost employment.