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134 Int'l Lab. Rev. 605 (1995)
Employment and Productivity in Industrialized Economies

handle is hein.journals/intlr134 and id is 619 raw text is: International Labour Review, 1995, Vol. 134, No. 4-5 Employment and productivity in industrialized economies Eileen APPELBAUM* and Ronald SCHETTKAT** mployment trends in the industrialized economies became remarkably L divergent in the 1970s and 1980s. Inter-country variations in the growth rates of gross domestic product (GDP) were much narrower than variations in employment growth (see table 1 for an overview of key variables). Cross-national research shows that employment growth in European countries has been much slower than in the United States. This has been explained by the obvious institutional differences between North America and Europe, with the suggestion that the overregulated European economies were unable to respond to shocks in the world economy. Eurosclerosis is the term that best describes this view of the impact of institutions on economic and labour market performance. As clear as the diagnosis from this cross-national research is the therapy: deregulate labour markets in the European economies and the forces unleashed by unregulated markets will bring full employment back to Europe (for proposals along these lines, see Donges, 1992; OECD, 1990, Chapter 5; OECD, 1994, Part III). Meanwhile, the political experiments of the Thatcher Government in the United Kingdom, the increasing social problems in the United States and experience in eastern Europe with markets not embedded in an institutional environment have raised doubts about the promised effects of deregulation. These doubts have been reinforced by detailed studies of the impact of institutions on economic performance and employment, which have questioned the results of oversimplified analyses (for exafliple, Buttler et al., 1995; Abraham and Houseman, 1993; Schettkat, 1992; and Sengenberger, 1987). Calmfors and Driffill (1988) and Freeman (1988b), for instance, have shown that both centralized and decentralized wage-bargaining systems can produce favourable employment outcomes. In the case of a centralized wage bargaining system, unions are expected to internalize the negative effects of excessive wage increases, whereas in a decentralized system the market is * Economic Policy Institute, Washington, DC. ** Wissenschaftszentrum Berlin. Copyright © International Labour Organization 1995

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