Effects of labour-market institutions on employment, wages, R&D intensity and growth in 27 OECD countries: From theory to practice

We extend the existing literature by focusing on the implications of labour-market institutions on (i) relative (un)employment of unskilled labour, (ii) wage inequality in favour of skilled labour, (iii) R&D intensity, and (iv) the economic growth, and by considering 27 OECD countries. By linking the unskilled wage to the skilled one, due to the indexation of social benefits to per-capita income, we accommodate the observed short-medium-long run paths of the four variables - in (i), (ii), (iii) and (iv) - in all countries between 1991 and 2008. On average, the obtained results also reveal that: Continental-European countries present the highest skilled-labour share in production; Eastern-European countries record the highest size of R&D spillovers; Nordic countries have the highest share of skilled labour in the total population, R&D intensity, and proportionality factor related to the generosity of the (unemployment) benefits; and Eastern-Asian countries have the highest unskilled-labour share in production.