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Labor market deregulation and globalization: empirical evidence from OECD countries

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Potrafke, Niklas

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Abstract This paper empirically investigates the influence of globalization on various aspects of labor market deregulation. I employ the data set by Bassanini and Duval (2006) on labor market institutions in OECD countries and the KOF index of globalization. The data set covers 20 OECD countries in the 1982–2003 period. The results suggest that globalization did neither influence the unemployment replacement rate, the unemployment benefit length, public expenditures on ALMP, the tax wedge, union density nor overall employment protection. In contrast, protection of regular employment contracts was diminished when globalization was proceeding rapidly. In fact, domestic aspects, such as unemployment and government ideology are more important determinants of labor market institutions and deregulation processes in OECD countries than globalization. For this reason, working conditions of unskilled workers are not likely to deteriorate and the jobs of unskilled workers are not likely to disappear in the course of globalization. All this is, of course, not to insinuate that globalization has any benign influence on labor market institutions.
Keywords labor market; deregulation; globalization; OECD member country; effect on employment
Classification Labor Market Research; Labor Market Policy
Method empirical; quantitative empirical
Free Keywords labor market (de)regulation; globalization; panel data; F57; F16; J58; J88; C23
Document language English
Publication Year 2010
Page/Pages p. 545-571
Journal Review of World Economics, 146 (2010) 3
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)