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Abstract:
A number of studies have found an association between corporatist institutions and
low unemployment in the 1970s and/or 1980s. Three gaps in our understanding of
corporatism's labor market effects are addressed here: (1) Which of the two principal
forms of corporatism-corporatist wage-setting or union participation in economic
policymaking, or both-generates these effects? (2) What are the causal
mechanisms? (3) Did these effects continue in the 1990s in the face of globalization,
restrictive monetary policy, growing dissension within labor movements, and related
developments? The impact of corporatism across 16 affluent OECD countries in the
1980s and 1990s is assessed using pooled time-series cross-section analysis. The
results suggest that wage coordination was conducive to low unemployment in the
1980s because it fostered moderation in labor costs, spurred faster economic
growth, and encouraged governments to more aggressively pursue policies to reduce
unemployment. In the 1990s, this effect disappeared, largely because unemployment
outcomes in low wage-coordination countries improved rather than because unemployment
outcomes in high wage-coordination countries deteriorated. Union participation
in economic policymaking was associated with low unemployment throughout
the two decades, conditional on the presence of leftist government. Union participation
appears to have had this effect mainly via government policy.
