The Political Economy of Flexicurity

Background data on employment protection legislation, social protection and labour for the paper “The Political Economy of Flexicurity” by Tito Boeri, Ignacio Conde-Ruiz and Vincenzo Galasso, Journal of the European Economic Association (2012).

The dataset used in the paper are mostly taken from European Labour Force Survey, European Survey on Income and Living Conditions, OECD (Directorate for employment, labour and social affairs statistics), fRDB-IZA Social Reforms Database and fRDB-IMF Labour Institutions Database (1980-2005).

Abstract

We document the presence of a trade-off in the labor market between the protection of jobs and the support offered to unemployed people. Different countries’ locations along this trade-off represent stable politico-economic equilibria. We develop a model in which individuals determine the mix of job protection and support to the unemployed in a political environment. Agents are heterogeneous along two dimensions: employment status — insiders and outsiders — and skills — low and high. Unlike previous work on the political economy of labor market institutions, we emphasize the role of job protection and unemployment benefits in the wage setting process. A key implication of the model is that flexicurity configurations with low job protection and high support to the unemployed should emerge in presence of a highly educated workforce. Panel regressions of countries’ locations along this institutional tradeoff are consistent with the implications of our model.

Credits: Tito Boeri, Vincenzo Galasso and Massimo Anelli.