By Thijs Bol
Over the past years the discussion about the strictness of the employment protection in the Netherlands has intensified. Several responsible parties (Minister of Social Affairs, employer organisations) argue that a loosening of employment protection leads to more economic prosperity. Less employment protection makes the labor market more dynamic, and in consequence there is less unemployment and more productivity. The central question of this paper is if this is really the case: does a loosening of employment protection lead to more economic prosperity? This question is answered by looking at two mechanisms (a decrease of unemployment and an increase of worker productivity) from Hall and Soskice´s (2001) “Varieties of Capitalism” -approach. We apply Hall and Soskice´s two ideal-typical market economies (liberal and coordinated market economies) to the case of employment protection and see if their clustering holds. We find that the cross-country study of employment protection and economic prosperity gives more ambiguous results, while the two clusters of market economies remain largely intact.
This article by Thijs Bol was originally published in Amsterdam Social Science Volume 1 Issue 2 (2009). Click here for the complete article.
Picture credit: Rachel Mills