labour market institutions

Richard B. Freeman
From The New Palgrave Dictionary of Economics, Second Edition, 2008
Edited by Steven N. Durlauf and Lawrence E. Blume
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Labour market institutions – unions, collective bargaining, government regulations – that help determine wages and working conditions differ greatly across countries. Advanced European countries rely extensively on institutions while the United States relies more on market forces. Labour institutions reduce the dispersion of pay and income inequality but have problematic effects on other aggregate economic outcomes, such as unemployment. The weak or inconclusive link between institutions and outcomes beyond wage dispersion could reflect different institutional effects under different economic conditions; efficient bargaining that balances the adverse and positive effects of institutions on those outcomes, or weaknesses in data and modelling.
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How to cite this article

Freeman, Richard B. "labour market institutions." The New Palgrave Dictionary of Economics. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2008. The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. 17 January 2018 <> doi:10.1057/9780230226203.0916

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