Bargaining Structure, Corporatism and Macroeconomic Performance(1988)
The structure of labour markets is increasingly perceived as a determinant of the macroeconomicp erformance of a country. This article focuses on one aspect of labour markets, the degree of centralization of wage setting. The main conclusion is that extremes work best.E itherh ighly centralizeds ystemsw ith national bargaining (such as in Austria and the Nordic countries), or highly decentralized systems with wage setting at the level of individual firms (such as in Japan, Switzerland and the US) seem to perform well. The worst outcomes with respect to employment may well be found in systems with an intermediate degree of centralization (such as in Belgium and the Netherlands). This conclusion is reasonably well supported by the available empirical evidence. It is also logical. Indeed, large and all-encompassing trade unions naturally recognize their market power and take into account both the inflationary and unemployment effects of wage increases. Conversely, unions operating at the individual firm or plant level have very limited market power. In intermediate cases, unions can exert some market power but are led to ignore the macroeconomic implications of their actions. These conclusions challenge the conventional wisdom which asserts that the more 'corporatist' is an economy, the better is its economic performance.
Centralisation of wage bargaining and macroeconomic performance: A survey(1993)
The wage bargaining systems of the OECD countries exhibit great differences. One extreme is represented by the United States and Canada with decentralised wage setting at the level of individual firms. The Nordic countries and Austria have traditionally represented the other extreme with highly centralised bargaining procedures. Other countries such as Germany, France, Italy, Belgium, and the Netherlands are between these polar cases with wage setting mainly at the industry level. The trend towards more decentralised bargaining in most European countries during the last decade has reduced these differences somewhat, but on the whole they seem to persist (Windmuller et a/., 1987).
The 1980s saw a growing interest in the macroeconomic consequences of various bargaining systems. It has been claimed that centralised wage bargaining is conducive to aggregate real-wage restraint and low unemployment (early references are McCallum, 1983; Bruno and Sachs, 1985; Bean et a/., 1986; Newell and Symons, 1987). This conclusion has provoked a large amount of research in the last few years, some of which has been based on the observation that both very centralised and very decentralised wage-setting systems seem to have been consistent with good macroeconomic performance (e.g., Heitger, 1987; Calmfors and Driffill, 1988; Rowthorn, 1992). One lesson appears to be that the effects of the bargaining system on aggregate wage formation may be far more complex than was originally acknowledged. The aim here is to survey the recent literature in the field and discuss the possibilities to draw policy conclusions. The focus will be on the theoretical contributions, although the empirical research is also briefly commented upon.
The structure of the article is as follows. Section I discusses how aggregate wage determination is likely to be affected if the effects of wage increases for specific groups on the rest of the economy are internalised under centralised bargaining. Section II extends this analysis by incorporating the restraining power of market pressures under decentralisation. Section 111 highlights different dimensions of centralisation, whereas Section IV addresses the effects of multilevel bargaining. Section V provides a critical assessment of empirical work on centralisation and wage behaviour. Finally, tentative policy conclusions are drawn in Section VI.
Active labour market policy and unemployment: a framework for the analysis of crucial design features(1994)
In recent years, there has been a growing interest in so called active labour market policy as a means of fighting the persistent unemployment in Western Europe. This is easy to understand in view of the disillusionment with more aggregate policies. On the one hand, traditional demand stimulation faces the risk of primarily increasing inflation with only small effects on employment; on the other hand, supply-side structural reforms in order to remove various labour market rigidities have either been difficult to implement or appear to produce only slow results. In this situation, active labour market policy seems to be regarded by many as the deus ex machina that will provide the solution to the unemployment problem. It is the purpose of this paper to make a realistic appraisal.
There exist many different interpretations of the concept of active labour market policy. Here I shall use a narrow definition: measures in order to improve the functioning of the labour market that are directed towards the unemployed. Active labour market policy will then comprise three basic subcategories: i) job broking with the purpose of making the matching process between vacancies and job seekers more efficient; ii) labour market training in order to upgrade and adapt the skills of job applicants; and iii) direct job creation, which may take the form of either public-sector employment or subsidisation of private-sector work.
Each type of labour market policy may work through several different channels. It is another aim of this paper to structure the various effects with the help of a simple analytical framework and to use that to highlight the crucial determinants of policy effectiveness.
The discussion is organised as follows. Section I presents the basic analytical framework. Section II is an attempt to structure the various types of effects, whereas Section 111 discusses the possibilities to draw conclusions on the effect of active labour market policy from existing empirical knowledge. Section IV focuses on the importance of various design features. Section V concludes.
Does active labour market policy work? Lessons from the Swedish experiences(2002)
The Swedish experiences of the 1990s provide a unique example of how large-scale active labour market programmes (ALMPs) have been used as a means to fight high unemployment. This paper discusses the mechanisms through which ALMPs affect (un)employment and surveys the empirical studies of the effects of ALMPs in Sweden. The main conclusions are: (i) there is hardly any evidence for a positive effect on matching efficiency; (ii) there are some indications of positive effects on labour force participation; (iii) subsidised employment seems to cause displacement of regular employment, whereas this appears not to be the case for labour market training; (iv) it is unclear whether or not ALMPs raise aggregate wage pressure in the economy; (v)in the 1990s, training programmes seem not to have enhanced the employment probabilities of participants, whereas some forms of subsidised employment seem to have had such effects; and (vi) youth programmes seem to have caused substantial displacement effects at the same time as the gains for participants appear uncertain.
On the whole, ALMPs have probably reduced open unemployment, but also reduced regular employment. The overall policy conclusion is that ALMPs of the scale used in Sweden in the 1990s are not an efficient means of employment policy. To be effective, ALMPs should be used on a smaller scale. There should be a greater emphasis on holding down long-term unemployment in general and a smaller emphasis on youth programmes. ALMPs should not be used as a means to renew unemployment benefit eligibility.