Political instability and labor market institutions

Arbeitspapier

This paper investigates the relationship between political instability and labor market institutions. We develop a theoretical model in which some features of the political process, by reducing the future yields of policy interventions, induce an incumbent government to choose labor market institutions that create wage rents and divert resources from public good provision and social insurance. We test these predictions empirically using panel data for 21 OECD countries for the period 1985-2006. We find strong evidence that political turnover and political polarization - our measures of political instability - are associated with a more regulated labor market, lower unemployment benefit replacement rates, and a smaller tax wedge on labor. We show also that there are strong complementarities between different dimensions of political instability, and evaluate their impact on labour market institutions across countries.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 6457

Classification and Topics

• Classification: Wirtschaft ; Unemployment: Models, Duration, Incidence, and Job Search ; Labor Standards: Public Policy ; Structure, Scope, and Performance of Government
• Subject: political instability ; labor market institutions ; unemployment ; Politische Stabilität ; Arbeitsmarktpolitik ; Institutionalismus ; Arbeitslosigkeit ; OECD-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lucifora, Claudio ; Moriconi, Simone
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/58832
• URN: urn:nbn:de:101:1-20120716941
• Last update: 10.03.2025, 11:41 AM CET