Assessing the long-run economic impact of labour law systems: a theoretical reappraisal and analysis of new time series date

Assessing the long-run economic impact of labour law systems: a theoretical reappraisal and analysis of new time series date
Document type
Working Paper
Author(s)
Deakin, Simon; Sarkar, Prabirjit
Publisher
Birkbeck, University of London
Date of publication
1 September 2008
Series
World Economy & Finance Research Programme Working Paper Series
Subject(s)
Trends: economic, social and technology trends affecting business
Collection
Business and management
Material type
Reports

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Standard economic theory sees labour law as an exogenous interference with market relations and predicts mostly negative impacts on employment and productivity. This paper argues for a more nuanced theoretical position: labour law is, at least in part, endogenous, with both the production and the application of labour law norms influenced by national and sectoral contexts, and by complementarities between the institutions of the labour market and those of corporate governance and financial markets. Legal origin may also operate as a force shaping the content of the law and its economic impact. Time-series analysis using a new dataset on legal change from the 1970s to the mid-2000s shows evidence of positive correlations between regulation and growth in employment and productivity, at least for France and Germany. No relationship, either positive or negative is found for the UK and although the US shows a weak negative relationship between regulation and employment growth, this is offset by productivity gains.

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