Labour regulation, corporate governance and varieties of capitalism

The literature aimed at exploring labor regulation and cross-country comparisons has left partly unexplored two major points: the first is the influence of employees within managerial processes, through the channel of employee representation at firm level. The second point concerns potential complementarities or substitutions between patterns of ownership or shareholder protection and labour regulation. The paper offers a critical overview of some selected studies that have started at filling these gaps by considering labour institutions for their influence on the ‘balance’ of power inside the firm, between owners, management, and employees. Firstly, it examines the literature which gives a central importance to the effects of legal origins on labour regulation and labour market outcomes. Secondly, it reviews the studies which focus on informal rules and de-facto practices and favour a stakeholder approach. A particular concern is paid to the overall consequences of the different institutional setups in the perspective of the “varieties of capitalism”, in which systems of labour regulation exert their function by strategical interactions with other institutions. Finally, it presents recent theoretical and empirical studies centring on employee investments in firm-specific human capital and on institutional devices which have the effect of tying the fortunes of the employee together with those of the firm. In the varieties of capitalism characterised by general skills and patterns of radical innovation, it is emphasized the internal governance exerted by ‘critical employees’. In economies with firm and industry specific skills, cooperation of employees with management in more shareholder value oriented firm (‘negotiated shareholder system’) are the more successful roads.Stakeholders, Corporate Governance, Varieties of Capitalism.

Stakeholders vs. shareholders in corporate governance

The paper is divided in two coordinate parts. The first considers in general the issue of stockholders vs. stakeholders oriented governance systems and their relative merits and demerits. The second part deals specifically with the issue of the principal-agent problem in a stakeholder context.Stakeholders; Corporate Governance; Varieties of Capitalism

Performance-Related Pay, Unions and Productivity in Italy: evidence from quantile regressions

Purpose – This study analyses the effects on productivity of Performance-Related Payments (PRP) and unions, and examines to what extent heterogeneity between firms characterises these influences. Design - For the Italian economy, the study presents firm-level quantile regressions for Total Factor Productivity (TFP) and controls for various observed characteristics of firms, worker composition and labour relations. Findings - The paper shows the significant effect of PRP and unions on the whole economy and on firms operating in the manufacturing industries. In these industries, the uniform incentive effects of PRP but the increasing impact of unions are estimated along the productivity distribution. Conversely, the role of management - significant in all sectors- is more efficacious in prospering large firms operating in services. Research limitations – The adoption of PRP schemes and the presence of unions maybe endogenous to firms’ productivity, and our estimates do not prove causal links but simply suggest correlations. Practical implications - The limited incentive effects of PRP schemes in services contribute towards explaining the slowdown in Italian productivity, whereas the role of unions is quite uniform among sectors. Originality- The paper addresses the hitherto poorly developed issue of firm heterogeneity and TFP, and offers the first Italian study of PRP and unions, which covers all dimensional classes of firms and non-agricultural sectors of the Italian economy.Performance – related pay, productivity.

Decentralised bargaining and performance related pay: new evidence from a panel of Italian firms

Purpose: This paper examines two institutional aspects closely related: (i) the extent to which collective bargaining has been decentralized at firm or district level; (ii) the extent to which, at this level of bargaining, Performance Related Pay (PRP) have been used. Design/methodology/approach: On the basis of a unique database, which contains recent information on nationwide sample of firms, panel estimates aimed at identifying the main factors which have favoured the adoption of the second level of bargaining and PRP are presented. Findings. unions, after size, is the main factor associated to the probability of the second level of bargaining and PRP. Significant estimates are also found for training. Research limitations/implications – Further research based on additional data should enable us to identify causal effects. Practical implications: It offers new evidence to evaluate ongoing reform proposals to implement firm-level agreements more tailored to firms’ specific needs. Originality/value our estimates are based on a unique dataset which contains recent information and a nationwide sample of firms, representative of the whole Italian economy (other studies on Italy are more limited in scope, since they focus on specific sectors or regions). Second, it addresses the question of training, an aspect so far not examined in relation to PRP in Italy.Performance–related pay, unions

Labour protection and productivity in the European economies: 1995-2005

The present study examines cross-national and sectoral differences in multifactor productivity growth in sixteen European countries from 1995 to 2005. The main aim is to ascertain the role of flexible employment contracts and collective labour relationships in explaining the ample differentials recorded in the European economy. Research Findings We use the EU KLEMS database for growth accounting and a broad set of indicators of labour regulations, covering two distinct ‘areas’ of labour regulation: employment laws and collective relations laws. This comprehensive approach allow us to consider arrangements that regulate allocation of labour inputs (fixed-term, part-time contracts, hours worked) and of payoff and decision rights of employees. We find that, since 1995, European countries have not followed similar patterns of growth. A large number of variations between European economies are caused by deep differentials in multifactor productivity and part of this heterogeneity is caused by sectoral diversities. We show that, in labour-intensive sectors such as services, fixed-term contracts, which imply shorter-term jobs and lower employment tenures, may discourage investment in skills and have detrimental effects on multifactor productivity increases. We also find that some forms of labour regulation and arrangements that give a ‘voice’ to employees mitigate these perverse effects on efficiency patterns. Employment protection reforms which slacken the rules of fixed-term contracts cause potential drawbacks in terms of low productivity gains. More stringent regulation of these practices, as well as a climate of collective relations, sustain long-term relationships and mitigate these negative effects.productivity, labour regulation, comparative institutions

Labour Protection and Productivity in EU Economies: 1995-2005

The present study examines cross-national and sectoral differences in multifactor productivity growth in sixteen European countries from 1995 to 2005. The main aim is to ascertain the role of flexible employment contracts and collective labour relationships in explaining the ample differentials recorded in the European economy. We use the EU KLEMS database for growth accounting and a broad set of indicators of labour regulations, covering two distinct 'areas' of labour regulation: employment laws and collective relations laws. This comprehensive approach allows us to consider arrangements that regulate allocation of labour inputs (fixed-term and part-time contracts, hours worked) and the payoff and decision rights of employees. We find that, since 1995, European countries have not followed similar patterns of growth. A large number of variations between European economies are caused by marked differentials in multifactor productivity and part of this heterogeneity is caused by sectoral diversities. We show that, in labour-intensive sectors such as services, fixed-term contracts, which imply shorter-term jobs and lower employment tenures, may discourage investment in skills and have detrimental effects on multifactor productivity increases. Employment protection reforms which slacken the rules of fixed-term contracts cause potential drawbacks in terms of low productivity gains. We also find that more stringent regulation of these practices, as well as a climate of collective relations, sustain long-term relationships and mitigate these negative effectsproductivity, labour regulation, comparative institutions

Temporary job protection and productivity growth in EU economies

The present study examines cross-national and sectoral differences in Total Factor Productivity (TFP) in fourteen European countries and ten sectors from 1995 to 2007. The main aim is to ascertain the role of employment protection of temporary contracts on TFP by estimating their effects with a “difference-in-difference” approach. Results show that deregulation of temporary contracts negatively influences the growth rates of TFP in European economies and that, within sectoral analysis, the role of this liberalization is greater in industries where firms are more used to opening short-term positions. By contrast, in our observation period, restrictions on regular jobs do not cause significant effects on TFP, whereas limited regulation of product markets and higher R&D expenses positively affect efficiency growth.

Costi di agenzia e diritti di proprietà: una premessa al problema del governo societario.

La letteratura teorica ed empirica sul tema della corporate governance trova i presupposti in due principali filoni di indagine: quello dell’impresa, vista al suo interno, ed individuata come rapporto di agenzia, una diretta filiazione del contributo di Berle e Means, e quello dell’impresa esaminata nei suoi confini esterni, come principio di autorità, nella natura colta da Coase e poi sviluppata nella teoria dei costi di transazione e dei diritti di proprietà di Grossman, Hart e Moore. Nel lavoro che segue si ripresentano per linee generali alcuni dei temi che si sono sviluppati dalle due diverse concezioni. Il primo, quello che individua l’impresa come insieme di contratti, viene riesaminato nella sezione 2. In tale sezione si considerano, inoltre, le implicazioni in termini di struttura finanziaria dell’impresa, analizzando il ruolo svolto dai costi di agenzia (Jensen e Meckling), dal problema della segnalazione in un contesto di asimmetrie informative (Myers Majluf), e dalla presenza di benefici privati manageriali non trasferibili (Aghion e Bolton). Nella terza sezione si esaminano, invece, le caratteristiche principali ed i nessi tra teoria dei costi di transazione e dell’impresa basata sui diritti di proprietà. Nella quarta sezione conclusiva si propone un primo bilancio e si individuano alcuni temi e problemi attualmente oggetto di ricerca. In particolare si sottolinea la necessità di una nuova teoria dell’impresa capace di incorporare al suo interno l’approccio agente –principale e quindi di configurarsi anche come teoria della governance societaria. A questa nuova teoria può concorrere una ridefinizione del ruolo svolto dall’investimento specialistico in capitale umano, come arricchimento della letteratura basata sui diritti di proprietà dei soli assets fisici. Si rimanda, infine, all’appendice per la trattazione analitica dei principali modelli esaminati.

Proprietà, accesso e controllo: nuovi sviluppi nella teoria dell’impresa ed implicazioni di corporate governance.

Nel lavoro che si presenta si confrontano, seppure a grandi linee, gli sviluppi del tema della ‘vecchia’ e ‘nuova’ governance’, a partire dalla distinzione posta originariamente da Berle e Means tra proprietà e controllo, fino a quella recente tra proprietà e ‘accesso’ emersa nei contributi di Rajan e Zingales. In particolare, nella sezione 2, si esaminano alcuni dei principali contributi che hanno sviluppato le tematiche del controllo societario, e si cercano di cogliere alcuni dei risultati principali e dei problemi oggetto di dibattito. Nella sezione 3, si considerano in modo più dettagliato alcuni degli studi recenti di particolare interesse, esposti analiticamente nell’appendice finale. Nelle conclusioni, si sottolineano gli sviluppi maggiormente promettenti e che condividono l’importanza del fattore umano, visto rispettivamente, come risorsa da incentivare, a cui dare ‘accesso’ e ‘potere’, ed infine da sottoporre a controllo nelle sue strategie di entrenchment.

Unemployment, Inflation and Monetary Policy in a Dynamic New Keynesian Model with Hiring Costs

The dynamic general equilibrium model with hiring costs presented in this paper delivers involuntary unemployment in the steady state and involuntary fluctuations in unemploy- ment. After calibrating the model, through simulations we are able to show that our model with labour market imperfections outperforms the standard NK model as for the persis- tence of responses to monetary shocks. Besides, the model can be easily used to assess the impact of di¤erent market imperfections on both the steady state and the dynamics of the economy. We are also able to show how two economies, differing in their degrees of imperfection, react to policy or non policy shocks: a rigid economy turns out to be less volatile than a flexible economy. Something that reflects the actual experience of the US (flexible) and European (rigid) economies.Hiring Costs; Wage bargaining; Output Gap; New Keynesian Phillips Curve; Monetary Policy