Labor markets and institutions

Institutions have important consequences for the performance of households, companies, governments, and entire markets—they determine the welfare of nations. Contributions to this subject area explore the underlying mechanisms and the politico-economic determinants of such structures. Many provide background analyses that offer evidence on how new institutions and policies would affect labor markets.

  • How responsive is the labor market to tax policy?

    When applied to the most responsive segments of the labor market, tax policy can increase lifetime earnings and employment

    Richard Blundell, May 2014
    With aging populations and increased demands on government revenue, countries need to boost employment and earnings. Tax policy should focus on labor market entry and retirement. Those are the points where labor supply is most responsive to tax incentives, which can enhance the flow into work of people leaving school and women with young children and can prolong employment among older workers. Human capital policy has a complementary role in improving the payoff to work and ensuring that earnings hold up longer over a lifetime.
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  • Employment protection

    Policymakers need to find the right balance between protecting workers and promoting efficient resource allocation and productivity growth

    Stefano Scarpetta, May 2014
    Laws on hiring and firing are intended to protect workers from unfair behavior by employers, to counter imperfections in financial markets that limit workers’ ability to insure themselves against job loss, and to preserve firm-specific human capital. But by imposing costs on firms’ adaptation to changes in demand and technology, employment protection legislation may reduce not only job destruction but also job creation, hindering the efficient allocation of labor and productivity growth.
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  • The internet as a labor market matchmaker

    How effective are online methods of worker recruitment and job search?

    Peter J. Kuhn, May 2014
    Since the internet’s earliest days, firms and workers have used various online methods to advertise and find jobs. Until recently there has been little evidence that any internet-based tool has had a measurable effect on job search or recruitment outcomes. However, recent studies, and the growing use of social networking as a business tool, suggest workers and firms are at last developing ways to use the internet as an effective matchmaking tool. In addition, job boards are also emerging as important for the statistical study of labor markets, yielding useful data for firms, workers, and policymakers.
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