Labour Market Institutions and the Employment Intensity of Output Growth

This paper deals with the effects of labour market institutions on labour market performance. We analyse as an indicator for the labour intensity of output growth the employment threshold (the minimum growth rate of output necessary to keep employment constant). We show for a sample of 17 OECD countries for the period 1971 to 2002 that the strictness of employment protection raises the employment threshold in all econometric specifications. A higher wage bargaining co-ordination and a higher tax wedge reduce also the labour intensity of production, although the effects are not in all econometric specifications significant.