Assessing the Long-Run Economic Impact of Labour Law Systems: A Theoretical Reappraisal and Analysis of New Time Series Data

35 Pages Posted: 16 Oct 2008

See all articles by Simon Deakin

Simon Deakin

University of Cambridge - Centre for Business Research (CBR); European Corporate Governance Institute (ECGI); University of Cambridge - Faculty of Law

Prabirjit Sarkar

University of Cambridge

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Abstract

Standard economic theory sees labour law as an exogenous interference with market relations and predicts mostly negative impacts on employment and productivity. We argue for a more nuanced theoretical position: labour law is, at least in part, endogenous, with both the production and the application of labour law norms influenced by national and sectoral contexts, and by complementarities between the institutions of the labour market and those of corporate governance and financial markets. Legal origin may also operate as a force shaping the content of the law and its economic impact. Time-series analysis using a new data set on legal change from the 1970s to the mid-2000s shows evidence of positive correlations between regulation and growth in employment and productivity, at least for France and Germany. No relationship, either positive or negative, is found for the UK and, although the United States shows a weak negative relationship between regulation and employment growth, this is offset by productivity gains.

Suggested Citation

Deakin, Simon F. and Sarkar, Prabirjit, Assessing the Long-Run Economic Impact of Labour Law Systems: A Theoretical Reappraisal and Analysis of New Time Series Data. Industrial Relations Journal, Vol. 39, Issue 6, pp. 453-487, November 2008, Available at SSRN: https://ssrn.com/abstract=1282321 or http://dx.doi.org/10.1111/j.1468-2338.2008.00501.x

Simon F. Deakin (Contact Author)

University of Cambridge - Centre for Business Research (CBR) ( email )

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European Corporate Governance Institute (ECGI)

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University of Cambridge - Faculty of Law ( email )

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Prabirjit Sarkar

University of Cambridge ( email )

Centre for Business Research
Cambridge, CB2 1AG
United Kingdom

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