Labour Market Regulation and Productivity
Â A useful reference; a methodologically sophisticated attack on the core neo liberal belief that labour market regulation undermines efficiency.
Why labour market regulation may pay off: Worker motivation, co-ordination and productivity growth
by Servaas Storm & C.W.M. Naastepad
ILO Economic and Labour Market Paper 2007/4
The impact of labour market regulation on labour productivity growth is ambiguous: on the one hand, regulation raises labour adjustment costs, which negatively affects productivity; but on the other hand, regulation may (for various reasons) raise worker motivation and commitment and (by means of wage bargaining co-ordination) stimulate labour-saving technological progress, thus raising productivity. We present empirical evidence for a cross-section of 20 OECD countries (1984-1997) that relatively rigid (i.e. regulated and co-ordinated) labour markets promote long-run labour productivity growth. This conclusion is reinforced when we differentiate between (three) categories of labour markets in the OECD countries and test for differences in productivity performance.