How supply-side labor market reforms harm
Author : trish-goza | Published Date : 2025-05-29
Description: How supplyside labor market reforms harm innovation and labor productivity growth Budapest 2728 March 2018 Alfred Kleinknecht Professor of Economics Emeritus wwwalfredkleinknechtnl Possible explanations of the productivity slump Is
Presentation Embed Code
Download Presentation
Download
Presentation The PPT/PDF document
"How supply-side labor market reforms harm" is the property of its rightful owner.
Permission is granted to download and print the materials on this website for personal, non-commercial use only,
and to display it on your personal computer provided you do not modify the materials and that you retain all
copyright notices contained in the materials. By downloading content from our website, you accept the terms of
this agreement.
Transcript:How supply-side labor market reforms harm:
How supply-side labor market reforms harm innovation and labor productivity growth Budapest, 27-28 March 2018 Alfred Kleinknecht Professor of Economics (Emeritus) www.alfredkleinknecht.nl Possible explanations of the productivity slump Is it a measurement problem? (No, see Byrne et al. 2016) Possible explanations of the productivity slump A low technological opportunities explanation: Exhaustion of the American IT Boom (Robert Gordon, 2016) Possible explanations of the productivity slump Short-termism in business (and among governments): A World-wide decline of basic research, OECD 2015 (+ lower absorptive capacities) Possible explanations of the productivity slump My explanation: supply-side labor market reforms The Emergence of Supply-side Economics After the 'Golden Age of Capitalism' (1948-1973) economic growth declined substantially: rise of unemployment, high inflation ('stagflation' etc.) … … Keynesian economists seemed to have no good explanation … and Keynesian macro-econometric models made serious forecasting errors after about 1975 The Age of Keynes The Emergence of Supply-side Economics The crisis of Keynesianism was a breeding ground for a revolution in the economics discipline: from 'demand-side economics' (Keynes) … … to 'supply-side economics' (Hayek, Friedman) and a sharp attack on the Keynesian welfare state. What does supply-side economics mean? Sobering of the welfare state Privatization & deregulation an a broad scale A ban on fiscal policy More inequality of incomes ('performance must pay!') No full employment but (sufficiently high) levels of 'NAIRU' unemployment Deregulation of labor markets – Easy firing and (downwardly) flexible wages Albert (1991) and Hall & Soskice (2002) distinguish two types of capitalism: Anglo-Saxon Liberal Market Economies (US, UK, Canada, New Zeeland, Australia) with 'flexible' labor markets (weak protection of labor) Coordinated Market Economies ('Old-Europe' + Japan) with 'rigid' labor markets (strong protection of labor) But Supply-side Economics had a limited reach: Complaint by supply-siders: Old Europe is too slow in adopting 'structural reforms' of labor markets! Liberal Market Economies (LME) versus Coordinated Market Economies (CME) Comparing some core variables for Liberal Market Economies (US, UK, Canada, New Zealand, Australia) versus: Coordinated Market Economies (proxy: EU-15, excl. UK) Key question: Does wage growth influence labor productivity growth? Theoretical rationale: Lower wage growth causes a slow diffusion of labor-saving process technology Key finding from panel data estimates: A one-per cent wage decline (increase) leads to 0.32 ̶ 0.49% lower (higher) growth of value added per labour hour Sources: Vergeer & Kleinknecht 2011: The impact of labor market deregulation on productivity, Journal of Post-Keynesian Economics, Vol. 33(2): 369-404. Vergeer
