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Institutions in the economic fitness landscape: What impact do welfare state institutions have on economic performance?

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  • Schettkat, Ronald

Abstract

This paper uses data from 20 OECD countries to investigate the impact of welfare state institutions (especially employment protection, wage bargaining and work incentives) on the functioning of the labour market both theoretically and empirically. It shows that the impact of welfare state institutions is not as clear-cut as the deregulationists' view suggests. This result may be surprising against the background of the common view that welfare state measures cause European employment problems but it is in line with the outcomes of many other economic studies. The reasons for the ambiguous effects of welfare state institutions are manifold but the most important reason is the complexity of the impacts. There are many side-effects or second-round effects of welfare state institutions which, although often neglected, prove to be very important in the real 'imperfect market' world. Many welfare state institutions only have a clear-cut negative effect against the background of the theoretical perfect market model.

Suggested Citation

  • Schettkat, Ronald, 2002. "Institutions in the economic fitness landscape: What impact do welfare state institutions have on economic performance?," Discussion Papers, Research Unit: Labor Market Policy and Employment FS I 02-210, WZB Berlin Social Science Center.
    • Handle: RePEc:zbw:wzblpe:fsi02210
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    Cited by:

    1. Eichhorst, Werner & Feil, Michael & Braun, Christoph, 2008. "What have we learned? Assessing labor market institutions and indicators," IAB-Discussion Paper 200822, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    2. Eckhard Hein & Achim Truger, 2005. "What ever happened to Germany? Is the decline of the former european key currency country caused by structural sclerosis or by macroeconomic mismanagement?," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(1), pages 3-28.
    3. Eckhard Hein & Achim Truger, 2005. "Macroeconomic policies, wage developments, and Germany’s stagnation," Macroeconomics 0508015, University Library of Munich, Germany.
    4. Karl Aiginger, 2005. "Labour market reforms and economic growth – the European experience in the 1990s," Journal of Economic Studies, Emerald Group Publishing, vol. 32(6), pages 540-573, October.
    5. Sarah Gammage, 2015. "Labour market institutions and gender equality," Chapters, in: Janine Berg (ed.), Labour Markets, Institutions and Inequality, chapter 12, pages 315-339, Edward Elgar Publishing.
    6. Truger, Achim, 2003. "Germany's Poor Economic Performance in the Last Decade: It's the Macroeconomy, not Institutional Sclerosis," WSI Working Papers 118, The Institute of Economic and Social Research (WSI), Hans Böckler Foundation.
    7. Ronald Schettkat, 2003. "Institutions in the Economic Fitness Landscape: What Impact Do Welfare State Institutions Have on Economic Performance?," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(2), pages 27-33, October.
    8. repec:ces:ifodic:v:1:y:2003:i:2:p:14567964 is not listed on IDEAS
    9. Karl Aiginger, 2004. "The Economic Agenda: a View from Europe," Review of International Economics, Wiley Blackwell, vol. 12(2), pages 187-206, May.
    10. Karl Aiginger, 2008. "The Impact of Competition on Macroeconomic Performance," Chapters, in: Klaus Gugler & B. Burcin Yurtoglu (ed.), The Economics of Corporate Governance and Mergers, chapter 14, Edward Elgar Publishing.
    11. Ronald Schettkat, 2003. "Institutions in the Economic Fitness Landscape: What Impact Do Welfare State Institutions Have on Economic Performance?," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(02), pages 27-33, October.
    12. Wolfgang Pollan, 2004. "Austrian Exceptionalism. Labour Market Institutions and Wage Disparity," WIFO Studies, WIFO, number 25130.
    13. G. Antonelli & P. P. Calia & G. Guidetti, 2014. "Approaching an investigation of multi-dimensional inequality through the lenses of variety in models of capitalism," Working Papers wp984, Dipartimento Scienze Economiche, Universita' di Bologna.
    14. Karl Aiginger, 2003. "The Relative Importance of Labour Market Reforms to Economic Growth," WIFO Working Papers 208, WIFO.
    15. Karl Aiginger, 2004. "Labour Market Reforms and Economic Growth. The European Experience in the Nineties," WIFO Working Papers 232, WIFO.
    16. Gunther Tichy, 2005. "Die ,Neue Unsicherheit‚ als Ursache der europäischen Wachstumsschwäche," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 6(3), pages 385-407, August.

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    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • J0 - Labor and Demographic Economics - - General
    • P1 - Political Economy and Comparative Economic Systems - - Capitalist Economies
    • P5 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems

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