Labor Market (De)Regulation and Wage-Setting Institutions in Mediterranean Capitalism

Labor market regulations and industrial relations institutions have been assigned a key role in explaining the comparatively poor performance of Mediterranean economies since 1980. According to this view, tightly regulated labor markets and weakly coordinated collective bargaining systems combined with a prominent role for the state are responsible for dualized labor markets, wage-setting practices that undermined competitiveness, and large inequalities (Siebert 1997; Scarpetta 1996; Murtin, de Serres, and Hijzen 2014). These institutional domains have accordingly been the target of recommendations from international organizations to liberalize, deregulate, and decentralize (OECD 1994). These pressures intensified with the run-up to the Economic and...