Institutional Frameworks And Labor Market Performance

The article discusses the differences in labor market performance between the United States and Germany. The US is seen as an example of successful job growth due to its unfettered markets, while Germany is viewed as having an overregulated labor market. However, there is increasing interest in the role of non-market institutions in Germany's economy. The authors argue that the choice is not between regulation and deregulation, but rather between different forms and degrees of regulation.

The labour markets in the United States and in Germany could hardly be more different. The USA, with its tremendous job growth, is often held up as the prime example of the job-creating power of unfettered markets, while Germany is seen as the textbook case of an overregulated European labour market stifling employment growth. For many policy advisers the lessons are clear: if Europeans want to emulate the success of the Americans, they must deregulate their economies. On the other hand, economists in the USA, impressed with Germany's income growth and social stability, have shown increasing interest in the role that non-market institutions play in the German context. This work provides an in-depth analysis of the functioning of various labour market institutions in both the USA and Germany. In close studies of the regulatory differences between the two countries, the authors examine the impact of those institutions on economic performance. On the basis of their findings, they argue that the choice is not one between regulation and deregulation, but rather between different forms and degrees of regulation.