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Do labour market reforms reduce labour productivity growth? A panel data analysis of 20 OECD countries (1960–2004)
Author(s) -
VERGEER Robert,
KLEINKNECHT Alfred
Publication year - 2014
Publication title -
international labour review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.433
H-Index - 46
eISSN - 1564-913X
pISSN - 0020-7780
DOI - 10.1111/j.1564-913x.2014.00209.x
Subject(s) - economics , productivity , deregulation , labour economics , panel data , wage growth , labour supply , openness to experience , wage , labour law , macroeconomics , psychology , social psychology , econometrics
Abstract Based on comprehensive regression analysis, the authors find that weak wage growth and a smaller labour share of national income significantly reduce labour productivity growth. They conclude that supply‐side labour market reforms have contributed to reducing labour productivity growth: this cannot be explained by a deregulation‐induced inflow of low‐productivity labour as proposed by OECD researchers. They also discuss why deregulation, easier firing and higher labour turnover may damage learning and knowledge accumulation in companies, notably by weakening the functioning of the “routinized” innovation model (“Schumpeter II”). Finally, their findings raise doubts about the relevance of Baumol's law and Verdoorn's law.