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The Economics of Imperfect Labor Markets

The Economics of Imperfect Labor Markets

Tito Boeri
Jan van Ours
Copyright Date: 2008
Edition: STU - Student edition
Pages: 344
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  • Book Info
    The Economics of Imperfect Labor Markets
    Book Description:

    Most labor economics textbooks pay little attention to actual labor markets, with the exception of the occasional reference to competitive labor markets like that of the United States.The Economics of Imperfect Labor Marketsis the only textbook to focus on imperfectly competitive labor markets and to provide a systematic framework for analyzing how labor institutions function and interact in these markets.

    The Economics of Imperfect Labor Marketsexamines the many institutions that affect the behavior of workers and employers in imperfect labor markets. These include minimum wages, employment protection legislation, unemployment benefits, active labor market policies, working time regulations, family policies, collective bargaining, early retirement programs, and education and migration policies. Written for advanced undergraduates and beginning graduate students, the book carefully defines and measures these institutions to accurately characterize their effects, and discusses how these institutions are today being changed by political and economic forces.

    Unique focus on institutions in imperfect labor marketsIntegrated framework and systematic coverageA self-contained chapter on each of the most important labor market institutionsEnd-of-chapter review questions

    eISBN: 978-1-4008-2983-5
    Subjects: Business, Political Science, Law

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-x)
  3. Preface
    (pp. xi-xvi)
  4. Symbols and Acronyms
    (pp. xvii-xxii)
  5. 1 Overview
    (pp. 1-28)

    A large body of academic papers and policy reports examines the effects of labor market institutions on economic performance. This literature was inspired by transatlantic comparisons of employment unemployment performance and draws mainly on cross-country comparisons. The most influential policy report—theOECD Jobs Studycommissioned by the Group of Seven (G7) in the early 1990s and completed in 1994—is an attempt to explain the dismal employment/unemployment performance of Europe vis-à-vis the U.S. “jobs miracle.” The key message provided by this report, as well as by many subsequent cross-country studies and policy reports, is that there are in Europe...

  6. 2 Minimum Wages
    (pp. 29-50)

    The minimum wage is a labor market institution that sets a wage floor, that is, a lower bound to the wage paid to individual workers. The first minimum wage was introduced in the United States in 1938 and paid 25 cents per hour. In 2007 the federal minimum wage was $5.85, in nominal terms 23 times larger, but, in real terms, only 1.4 times larger than 70 years ago.

    Although most countries in the world have some form of minimum wage, the scale, eligibility, and operational details change from country to country, so providing a cross-country-comparable definition and measure of...

  7. 3 Unions and Collective Bargaining
    (pp. 51-80)

    Labor (or trade) unions are voluntary membership organizations. Like political parties and churches, they represent the interests of their members, and their nature is defined by their membership.

    Historically, unions emerged in the eighteenth century in the United Kingdom and the United States as craft, occupational organizations providing mutual insurance to their members against unemployment, death, and sometimes old age. Later, well into the nineteenth century, they gradually became industrial unions representing workers in semiskilled positions, harder to replace with unemployed workers or immigrants. Increasingly at the beginning of the twentieth century they became national organizations aiming at representing all...

  8. 4 Payroll Taxes
    (pp. 81-100)

    Historically, taxes emerged from seigneurial arrangements by which the king could obtain extraordinary revenues to meet unusual temporary conditions such as wars. From these extraordinary revenues medieval taxation developed, which ultimately became the fiscal basis for government expenditures (Ames and Rapp, 1977).

    Payroll taxes consist of income taxes and social security contributions. Revenues from income taxation are an important source of public finance and are unrelated to the labor market. Social security contributions are directly related to the functioning of the labor market. Payroll taxes drive awedgebetween the cost of labor to the firm and the net wage...

  9. 5 Regulation of Working Hours
    (pp. 101-120)

    Working hours have been a topic of heated debate between unions and employers for a long time. May 1, 1886, was a day of strikes in the United States for the introduction of an eight-hour working day. To commemorate the working-hours struggle between unions and employers, May 1 was declared Labor Day, which is still a holiday in many countries. The discussion on the optimal length of the working day concerns wages, leisure, and productivity. In past decades there have been a number of clear trends in hours of work. Working hours per week have been declining slowly but have...

  10. 6 Retirement Programs
    (pp. 121-138)

    From a historical point of view, large-scale retirement of workers is a rather recent phenomenon. Until the beginning of the twentieth century, not many workers retired. They worked as long as they could, and if they stopped working, retirement often involved a few years of dependence on children at the end of life. In the course of the twentieth century retirement programs were introduced in industrialized countries. Today, retirement is typically an extended period of self-financed independence and leisure, and in many countries workers are even forced to retire because there is a mandatory retirement age. In many countries, because...

  11. 7 Family Policies
    (pp. 139-156)

    For parents, labor supply, leisure, and child care decisions are interdependent. These decisions are determined not only by preferences and labor market conditions—wages and job opportunities—but also by family policies. Family policies consist of parental leave facilities and child care arrangements. Parental leave arrangements make it easier for mothers to stay attached to the labor market when raising children. The presence of child care affects mothers’ choices with respect to leisure time versus working time. Social policies that reduce the costs to raise children—increasing the availability and quality, and reducing the costs of child care—may affect...

  12. 8 Education and Training
    (pp. 157-174)

    In many countries public spending on education increased significantly at the end of the nineteenth century. In 1880, for example, the United States spent 1 percent of its GDP on primary and secondary public education. By 1920 this figure had doubled, and by 1980 it had reached 4.1 percent. From 1870 to 1970, the days attended during the school year doubled, and the fraction of those 10 to 19 years old enrolled in school increased from about 40 to 90 percent (Rangazas 2002).

    Schooling and training are investments by individuals and firms where costs are paid in exchange for expected...

  13. 9 Migration Policies
    (pp. 175-198)

    International migration is the great absentee in the era of globalization. While the barriers to international trade and capital mobility have already been largely removed, cross-border worker flows are tightly restricted. Until a few decades ago many European countries were mass out-migration countries. According to historians, about 60 million Europeans moved away from the Old Continent in the period 1820–1940. Two-thirds of them went to the United States (one can find their names on the website Currently Europe is attracting more migrants in proportion to its population than the United States. Countries like Italy that were sending 1...

  14. 10 Employment Protection Legislation
    (pp. 199-224)

    Employment protection legislation (EPL) consists of the set of norms and procedures to be followed in case of dismissals of redundant workers. EPL imposes legal restrictions on dismissals and compensations to workers to be paid by their former employers in case of early termination of a permanent employment contract. A number of procedures are also envisaged under EPL that have to be followed in case of both individual and collective layoffs. The final decision on the legitimacy of a layoff generally depends on a court ruling. From the point of view of economic analysis it is very important to note...

  15. 11 Unemployment Benefits
    (pp. 225-254)

    Unemployment benefits (UBs) protect individuals against uninsurable labor market risk. Unlike employment protection legislation (covered in chapter 10) that protects jobholders by making it more difficult for employers to dismiss their workers, UBs offer replacement income to workers experiencing unemployment spells after having lost their job.

    The first unemployment benefit system was introduced in the United Kingdom in 1911. Many people did not like the idea that persons not working could receive a state transfer, and beneficiaries were ironically named people “on the dole.” Nowadays all OECD countries, most middle-income countries, and some developing nations have an unemployment benefit system...

  16. 12 Active Labor Market Policies
    (pp. 255-276)

    Active labor market policies (ALMPs) have a long-standing tradition in many countries. At the beginning of the twentieth century employment offices were built up. In the depression of the interwar years government programs were established to put the unemployed to work. Later, labor market retraining was organized to stimulate occupational and regional mobility to facilitate structural adjustments.

    Currently ALMPs aim at improving the functioning of the labor market by enhancing labor market mobility and adjustment, facilitating the redeployment of workers. ALMPs intend to overcome market failures arising from generous unemployment benefit and welfare benefit schemes. There are four basic functions...

  17. 13 Institutional Interactions
    (pp. 277-290)

    Labor market institutions never operate in isolation. Their effects on employment, unemployment, wages, and productivity interact with those of other institutions. Often an institution is introduced just because it counteracts some undesirable effects of another institution. To give an example, the active labor market programs (ALMPs) presented in chapter 12 have been introduced to reduce disincentive effects associated with the provision of unemployment benefits (chapter 11). Sometimes it is optimal to do so because different instruments are needed to achieve different goals. In the preceding example unemployment benefits provide protection against uninsurable labor market risk, while active labor market policies...

  18. References
    (pp. 291-312)
  19. Index
    (pp. 313-319)