Theodoropoulou, Sotiria
(2008)
The political economy of unemployment, labour
market institutions and macroeconomic policies in
open economies: the cases of Germany and the Netherlands in the 1980s and 1990s.
PhD thesis, London School of Economics and Political Science.
Abstract
The question that this thesis addresses is how western European countries with
regulated labour markets managed to reduce their unemployment rates in the 1980s
and 1990s. Most of the accounts in mainstream economics literature have been
trying to explain this turnaround in performance in terms of labour market reforms
that were undertaken in the direction of deregulation and by stressing potential
interactions between such reforms in labour market policies, backing their claims
with econometric evidence that is usually not robust.
This thesis takes a different approach both theoretically and empirically.
Theoretically, it develops the hypothesis that in open economies, coordinated
collective wage bargaining can lead to moderate wage/price outcomes in the
presence of conservative/stability oriented macroeconomic policies even in the
presence of generous labour market protection policies. Moreover, in countries with
regulated labour markets, the effectiveness of moderate bargaining outcomes and
labour market reforms in combating unemployment will depend on the size and
openness of the economy: the smaller and more open an economy is, the more
effective moderate bargaining outcomes and labour market reforms will be in
reducing the equilibrium rate of unemployment. This hypothesis is an alternative to
the ‘deregulation thesis’ rather than a competing one. This hypothesis is explored
and further qualified in this thesis through qualitative comparative analysis-QCA
with fuzzy-sets and the detailed study of the cases of the Netherlands and Germany
in the 1980s and the 1990s.
The upshot of the analysis of this thesis is that the effects of labour market
policies and institutions on labour market performance should be considered within
the context of macro-level institutions (e.g. macroeconomic policies) and
characteristics (e.g. openness to trade) if we want to accurately assess the need to
reform them.
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